202 Readings C

Smartphones Are Bridging the Digital Divide

Federal
regulators weighing the proposed AT&T and T-Mobile merger must not ignore a
significant but quietly unfolding revolution in how Americans connect to the
Internet for information and products. The changes began with the 2007-2008
launch of the iPhone and Android and have accelerated with the introduction of
low-cost cellphone plans. What is most striking about this smartphone revolution
is its democratic character.

This
month's Pew Internet Report on Smartphones spotlights some specifics.
Under 30, nonwhite,
low-income and less-educated smartphone users report "they mostly go online
using their phones." Some 87% of them, according to Pew, sometimes use their
mobile phones to browse the web, but 38% use their handsets as their primary
means to access the Internet.

National
surveys conducted in June by the Institute for Communication Technology
Management (CTM) at the University of Southern California similarly found that
more than 60% of
Latino, black and young smartphone users often or even always use smartphones
for their Internet connections. This use of smartphones for Internet browsing is
far more extensive than by whites. For instance, while only 26% of whites have
smartphones, they are owned by 37% of African-Americans and 46% of Latinos
surveyed by CTM.

The
development of a mobile device capable of delivering multiple applications for
Web browsing, information and entertainment is an obvious driver of the
smartphone revolution. A business model has democratized the
revolution: pre-paid or no-contract cellphone plans, ranging in price from $30
to $50 a month, and mostly offered by regional wireless carriers like U.S.
Cellular, MetroPCS and Cricket Communications. So popular have these plans
become that multiple carriers in most U.S. cities, including wireless giants
AT&T and Verizon, have jumped onto the prepaid bandwagon, offering more
plans and phones to consumers.

In
2010, prepaid plans accounted for 10% of the $160 billion in revenues generated
by the mobile-phone market, according to CTIA, the U.S. wireless association.
Recent data suggest that share will likely grow. From May 2010 to May 2011, new
prepaid customers increased by 6.9 million, compared with 3.6 million new
subscribers who signed the traditional two-year contract with monthly fees,
according to Wireless Week.

This
smartphone revolution has made wireless data the fastest-growing service
category in the 300 million cellphone market, with average revenue per user
growing more than 20% from 2009 to 2010. Latinos and blacks are
disproportionately higher users of data services, according to CTM
surveys.
For example, minorities
are twice as likely as the average user to access health information via
smartphones. Use of m-commerce—buying via a phone—is 50% higher among blacks
and Latinos.

The
democratization of connectivity seems to undercut at least one objection to
AT&T's proposed merger with T-Mobile. The
concern is that the merged company might decrease Internet access for low-income
consumers by dropping less profitable prepaid plans. But with the U.S. cellphone market
nearly saturated and with wireless-data revenue projected to outstrip voice next
year, all carriers—large or small—have a strong business incentive to offer
their customers cost-effective data plans as well as voice.

For
years, government officials, as well as academics, worried that the rise of the
Internet would create a digital divide between those who could connect and those
who couldn't. They wrestled with how to bring broadband to rural communities and
to poor urban residents who couldn't afford laptops or a broadband connection at
home. Many decried the
U.S.'s 12th place ranking—behind South Korea, the United Kingdom, Canada and
Germany—in fixed-broadband connectivity.

But no
one metric can begin to capture the complexity of today's marketplace for
Internet connectivity. Officials who still cling to such statistics as
fixed-broadband access, and regulators who make policy around them, overlook the
emerging reality brought about by rapid technological progress, business
innovation and a dynamic wireless market. The smartphone revolution enables
people to take matters into their own hands and find effective ways to narrow
the digital divide.

Ms.
Hood is executive director of the Institute for Communication Technology
Management at the Marshall School of Business, University of Southern
California. The institute's 30 corporate sponsors include wireless and
communications companies, among them AT&T, Verizon and US
Cellular.

August
29, 2011

Why
Are Finland's Schools Successful?

The
transformation of Finland's education system began some 40 years ago as a key
part of the country's economic recovery plan. Educators had little idea it
was so successful until 2000, when the first results from the Programme for
International Student Assessment (PISA), a standardized test given to
15-year-olds in more than 40 global venues, revealed Finnish youth to be the
best young readers in the world. Three years later, they led in math, says
Smithsonian Magazine.

By
2006, Finland was first out of 57 countries (and a few cities) in science.

In
the 2009 PISA?scores
released last year, the nation came in second in science, third in reading and
sixth in math among nearly half a million students worldwide.

By
contrast, the United States has muddled along in the middle for the past
decade.

Finland's
schools were not always a wonder. Until the late 1960s, most children left
public school after six years and only the privileged or lucky got a quality
education.

In
1963, the Finnish Parliament decided public schools would be organized into
one system of comprehensive schools for ages 7 through 16.

Teachers
from all over the nation contributed to a national curriculum that provided
guidelines, not prescriptions, and resources were distributed equally.

The
second critical decision came in 1979, when reformers required that every
teacher earn a fifth-year master's degree in theory and practice at one of
eight state universities.

From
then on, teachers were effectively granted equal status with doctors and
lawyers.

By
the mid-1980s, a final set of initiatives shook the classrooms free from the
last vestiges of top-down regulation and control over policies shifted to town
councils.

There
are no mandated standardized tests in Finland, apart from one exam at the end of
students' senior year in high school. There are no rankings, no
comparisons or competition between students, schools or regions.

Ninety-three
percent of Finns graduate from academic or vocational high schools, 17.5
percentage points higher than the United States, and 66 percent go on to
higher education, the highest rate in the European Union.

Yet
Finland spends about 30 percent less than the United States.

Teachers
in Finland also spend fewer hours at school each day and spend less time in
classrooms than American teachers.

Traveling
Back to the Future on Intercity Buses

By
Michael Barone

8/25/2011

Not
long ago, I wrote about how the private sector outraces and laps government.
While governments dither and dispute, the private sector discovers.

The
example I mentioned then was energy. For years, governments, national and
local, have been promoting wind and solar power, to little practical effect.
Curiously, the biggest wind power producer is Rick Perry's Texas. But wind power
isn't reliable, and both wind and solar cause serious damage to the environment.

In the
meantime, the oil and gas industries -- the favorite target of Barack Obama and
congressional Democrats -- have developed new techniques of horizontal drilling
and hydraulic fracturing (fracking) that have vastly expanded recoverable
American energy supplies.

Now
across my laptop comes news of another area in which private sector actors have
overtaken government. Again an older technology has been improved and adapted to
fill a need, while government dithers.

The old
technology in this case is buses.

While
the Obama administration has been desperately seeking to spend $53 billion on
so-called high-speed rail lines, private businessmen have developed
Chinatown and Megabus lines that provide inter-city service that has attracted
legions of price-conscious travelers.

Chinatown
bus service started in 1998 to provide a cheap way for Asian immigrants to get
from New York to Boston. You lined up at the curb, paid your $20 fare to the
driver and settled into a comfortable bus for four hours or so.

Now
there's service to multiple destinations (including gambling casinos) from New
York and on the West Coast, too. And competitors have arisen. Megabus routes exist between Maine
and Memphis and Minneapolis, notably including many college towns.

The
buses have bathrooms, AC power outlets and free wi-fi. They're not as fast as
the much more expensive Acela train, but they tend to run on schedule.

Bus
travel used to be decidedly downscale, with a clientele that scared off
middle-class travelers. That's because, back in the days of heavily regulated
transportation, bus lines followed the passenger railroad model, with stations
in central cities, routes with multiple stops, fares propped up by monopolies
and operators with no economic incentive to provide comfortable or pleasant
service.

Chinatown
and Megabus operators ditched this model for one that works for travelers for
whom money is scarce and time plentiful. Who needs a station? Intercity buses
can occupy curb space briefly just as city buses do.
Who needs multiple
stops? You can make money on people who want to go from one specific location to
another.

Needless
to say, the cost to the taxpaying public is minimal. City streets and interstate
highways already exist, and maintenance gets financing from gas taxes. And the
system has enormous flexibility. If fewer passengers want to line up in
Chinatown and more on the Upper West Side, the bus can change stops.

Private
bus operators have effectively taken a 100-year-old technology, the bus, and
adapted it seamlessly to the 21st century.

Compare
high-speed rail. It is tethered to enormous stations that must be built or
refurbished and limited to particular routes that, once the rails are laid down,
cannot be changed except at prohibitive expense.

And it
is enormously costly. In just two years, the estimated cost of the Obama
administration's pet project, California high-speed rail, in the "flatter than
Kansas" Central Valley has risen from $7.1 billion to $13.9 billion.
Oxford economist Bent
Flyvbjerg has found that high-speed rail projects always end up costing more,
usually far more, than estimates.

In
addition, operating costs almost always end up higher than fares.
And fares always turn
out to be expensive, comparable to airfare if you book a popular flight the day
before your trip.

So
high-speed rail is a form of transportation on which government subsidizes
business travelers. You don't see backpackers anymore on the Acela or Amtrak
trains from Washington to New York. They're taking the Chinatown bus or one of
its competitors.

Finally,
most of the high-speed rail lines the Obama administration is touting are a
whole lot slower than France's TGV or Japan's bullet train. You can beat the proposed
Minneapolis-Duluth line by going just slightly over the speed limit on I-35. The
proposed line from the college town of Iowa City to Chicago would take longer
than the currently operating bus service.

So the
private sector provides cheap intercity transportation while government
struggles to waste $53 billion. Please remind me which is the wave of the
future.

Is
Occupational Licensing Necessary?

Restrictions
on who can and cannot practice a certain profession have increased significantly
in recent years. Occupational licensing -- the most onerous restriction --
requires people to pass tests and meet other criteria before they can practice a
trade. It is a barrier to employment, disproportionately affecting
low-income and immigrant workers, and frequently benefitting established
practitioners by limiting competition from new entrants, says Courtney
O'Sullivan, an editor with the National Center for Policy Analysis.

According
to labor economists Morris M. Kleiner and Alan B. Krueger:

In
the 1950s, less than 5 percent of U.S. workers were in occupations that
required a license.

By
the 1980s, that number was almost 18 percent.

In
2006, 29 percent of workers were in occupations that required a license.

Advocates
of licensing are typically well-established practitioners of that trade.
They have an incentive to reduce the number of competitors and often claim
that licensing will safeguard consumers from unqualified providers.
However, there is little evidence that occupational licensing increases
product quality. For example:

The
Institute for Justice asked florists to rate the quality of 25 arrangements
from licensed florists in Louisiana and 25 arrangements from unlicensed
florists in Texas. The judges could detect no difference in quality.

In
2001, the Canadian Office of Fair Trading looked at 15 academic studies that
consider the effects of occupational regulation on product quality and found
regulation had a positive impact in just two instances.

Many
jobs could be performed by unlicensed individuals at a lower cost, without
sacrificing safety or quality. Licensing decreases the rate of job
growth by an average of 20 percent and costs the economy an estimated $34.8
billion to $41.7 billion per year, in 2000 dollars, reports the Reason
Foundation.

Registration
and voluntary certification by professional and vocational organizations could
offer comparable quality and safety standards, without the costly barriers
imposed by licensing, says O'Sullivan.

To most
Americans, the word "poverty" implies significant material deprivation,
including inadequate food, clothing and shelter. The actual living conditions of
America's poor are very different, however. According to the government's own
survey data, in 2005:

•
The average household defined as poor lived in a house or apartment equipped
with air conditioning and cable TV.

• The
family had a car (a third of the poor have two or more cars).

• For
entertainment, the household had two color televisions, a DVD player and a VCR.

• If
there were children in the home (especially boys), the family had a game system,
such as an Xbox or PlayStation.

• In
the kitchen, the household had a microwave, refrigerator, and an oven and stove.

• Other
household conveniences included a clothes washer, clothes dryer, ceiling fans, a
cordless phone and a coffeemaker.

The
home of the average poor family was in good repair and not overcrowded.
In fact, the typical
poor American had more living space than the average (non-poor)
European, the Heritage scholars note. The poor family was able
to obtain medical care when needed. When asked, most poor families stated they
had had sufficient funds during the past year to meet all essential needs.

Over
the past 50 years, televisions have gotten a lot cheaper… Consequently, even a
low-income person can reliably obtain a level of television-based entertainment
that would blow the mind of a millionaire from 1961. At the same time, if you’re
looking to live in a safe neighborhood with good public schools in a
metropolitan area with decent job opportunities you’re going to find that this
is quite expensive. Health care has become incredibly expensive.

But
what do these three sectors have in common that’s missing from the market for
television sets and video games? Government. I’ll
save health care for another occasion, and consider the other two.

Does
anyone doubt that government totally dominates education, shaping and molding
every facet of it? We
are all forced to pay for the public system, even if we don’t use its services.
And even though the public schools may work tolerably in well-to-do suburbs,
they are generally miserable in neighborhoods where most poor people reside.

That
brings us to housing. For one thing, the real estate market is highly
regulated. So much so that many poor people have been priced out
of the private marketplace and must rely on public housing instead. More
importantly, the way
the government runs the school system, the housing market is really a surrogate
market for public education.

A
study of north Dallas schools found that housing prices varied in
lock step with independent measures of school quality. Another study compared
housing prices in Highland Park, a ritzy Dallas enclave with its own school
system, except for one tiny area that spills over into the Dallas Independent
School District. Along a Highland Park street that divides the two school
systems, there is no visible difference in the appearance of the houses. But the
average difference in price was $72,000. That’s what it costs to go to a
Highland Park school rather than an inner city school.

Remember
this price differential is not created by the real estate market. It reflects
the relative value of two government school systems. “Tragically,” Yglesias
writes, “many Americans can’t afford a house in a safe neighborhood with a
decent school that’s within a convenient commute of the central business
district of a major city.”

True
enough, but whose fault is that? Don’t blame it on capitalism.

wsj
AUGUST 4, 2011

Why the Gender Gap Won't Go Away

Early
this past spring, the White House Council on Women and Girls released a
much-anticipated report called Women in America. One of its conclusions struck a
familiar note: today, as President Obama said in describing the document, "women
still earn on average only about 75 cents for every dollar a man earns. That's a
huge discrepancy."

It is
a huge discrepancy.
It's also an exquisite example of what journalist Charles Seife has dubbed
"proofiness." Proofiness is the use of misleading
statistics to confirm what you already believe. Indeed, the
75-cent
meme depends on a panoply of apple-to-orange comparisons that
support a variety of feminist policy initiatives, from the Paycheck Fairness Act
to universal child care, while telling us next to nothing about the well-being
of women.

This
isn't to say that all is gender-equal in the labor market. It is not. It also
isn't to imply that discrimination against women doesn't exist or that employers
shouldn't get more creative in adapting to the large number of mothers in the
workplace. It does and they should. But by severely overstating and
sensationalizing what is a universal predicament (I'm looking at you, Sweden and
Iceland!), proofers encourage resentment-fueled demands that no government
anywhere has ever fulfilled—and that no government ever
will.

Let's
begin by unpacking that 75-cent statistic, which actually varies from 75 to
about 81, depending on the year and the study. The figure is based on the
average earnings of full-time, year-round (FTYR) workers, usually defined as
those who work 35 hours a week or
more.

But
consider the mischief contained in that "or more." It makes
the full-time category embrace everyone from a clerk who arrives at her desk at
9 am and leaves promptly at 4 pm to a trial lawyer who eats dinner four nights a
week—and lunch on weekends—at his desk. I assume, in this case, that the clerk
is a woman and the lawyer a man for the simple reason that—and here is an
average that proofers rarely mention—full-time men work more hours than
full-time women do. In 2007, according to the Bureau of
Labor Statistics, 27 percent of male full-time workers had workweeks of 41 or
more hours, compared with 15 percent of female full-time workers; meanwhile,
just 4 percent of full-time men worked 35 to 39 hours a week, while 12 percent
of women did. Since FTYR men work more than FTYR
women do, it shouldn't be surprising that the men, on average, earn
more.

The
way proofers finesse "full-time" can be a wonder to behold. Take a recent article in the
Washington Post by Mariko Chang, author of a forthcoming book on the wealth gap
between women and men. Chang cites a wage difference between "full-time" male
and female pharmacists to show how "even when they work in the same occupation,
men earn more." A moment's Googling led me to a 2001 study in the Journal of the
American Pharmacists Association concluding that male pharmacists worked 44.1
hours a week, on average, while females worked 37.2 hours. That
study is a bit dated, but it's a good guess that things haven't changed much in
the last decade. According to a 2009 article in the American Journal of
Pharmaceutical Education, female pharmacists' preference for reduced work hours
is enough to lead to an industry labor shortage.

The
other arena of mischief contained in the 75-cent statistic lies in the seemingly
harmless term "occupation."
Everyone knows that a CEO makes more than a secretary and that a computer
scientist makes more than a nurse. And most people wouldn't be shocked to hear
that secretaries and nurses are likely to be women, while CEOs and computer scientists
are likely to be men. That obviously explains much of the wage
gap.

But
proofers often make the claim that women earn less than men doing the exact same
job. They can't possibly know that. The Labor Department's occupational
categories can be so large that a woman could drive a truck through them. Among
"physicians and surgeons," for example, women make only 64.2 percent of what men
make. Outrageous, right? Not if you consider that there are dozens of
specialties in medicine: some, like cardiac surgery, require years of extra
training, grueling hours, and life-and-death procedures; others, like
pediatrics, are less demanding and consequently less highly rewarded.
Only
16 percent of surgeons, but a full 50 percent of pediatricians, are women. So
the statement that female doctors make only 64.2 percent of what men make is
really on the order of a tautology, much like saying that a surgeon working 50
hours a week makes significantly more than a pediatrician working
37.

A good
example of how proofers get away with using the rogue term "occupation" is
Behind the Pay Gap, a
widely quoted 2007 study from the American Association of University Women whose
executive summary informs us in its second paragraph that "one year out of
college, women working full time earn only 80 percent as much as their male
colleagues earn." The report divides the labor force into 11
extremely broad occupations determined by the Department of Education. So ten
years after graduation, we learn, women who go into "business" earn considerably
less than their male counterparts do. But the businessman could be an
associate at Morgan Stanley who majored in econ, while the businesswoman could
be a human-relations manager at Foot Locker who took a lot of psych
courses. You don't read until the end of the summary—a point at
which many readers will have already Tweeted their indignation—that when you control for such
factors as education and hours worked, there's actually just a 5 percent pay
gap. But the AAUW isn't going to begin a
report with the statement that women earn 95 percent of what their male
counterparts earn, is it?

Now,
while a 5 percent gap will never lead to a million-woman march on Washington,
it's not peanuts. Over a year, it can add up to real money, and over decades in
the labor force, it can mean the difference between retirement in a Boca Raton
co-op and a studio apartment in the inner suburbs. Many studies have examined the
subject, and a consensus has emerged that when you control for what researchers
call "observable" differences—not just hours worked and occupation, but also
marital and parental status, experience, college major, and industry—there is
still a small unexplained wage gap between men and women. Two Cornell
economists, Francine Blau and Lawrence Kahn, place the number at about 9 cents
per dollar. In 2009, the CONSAD Research Corporation, under the auspices of the
Labor Department, located the gap a little lower, at 4.8 to 7.1
percent.

So
what do we make of what, for simplicity's sake, we'll call the 7 percent gap?
You can't rule out discrimination, whether deliberate or unconscious. Many women
say that male bosses are more comfortable dealing with male workers, especially
when the job involves late-night meetings and business conferences in Hawaii.
This should become a smaller problem over time, as younger men used to coed
dorms and female roommates become managers and, of course, as women themselves
move into higher management positions. It's also possible that male managers
fear that a female candidate for promotion, however capable, will be more
distracted by family matters than a male would be. They might assume that women
are less able to handle competition and pressure. It's even possible that female
managers think such things, too.

No,
you can't rule out discrimination. Neither can you rule out other, equally
plausible explanations for the 7 percent gap. The data available to researchers
may not be precise; for instance, it's extremely difficult to find accurate
measures of work experience. There's also a popular theory that
women are less aggressive than men when it comes to negotiating
salaries.

The
point is that we don't know the reason—or, more likely, reasons—for the 7
percent gap. What
we do know is that making discrimination the default explanation for a wage gap,
as proofers want us to do, leads us down some weird rabbit holes. Asian men and
women earn more than white men and women do, says the Bureau of Labor
Statistics. Does that mean that whites are discriminated against in favor of
Asians? Female
cafeteria attendants earn more than male ones do. Are men
discriminated against in that field? Women who work in construction earn
almost exactly what men in the field do, while women in education earn
considerably less. The logic of default discrimination would
lead us to conclude that construction workers are more open to having female
colleagues than educators are. With all due respect to the construction workers,
that seems unlikely.

So why
do women work fewer hours, choose less demanding jobs, and then earn less than
men do? The answer is obvious: kids. A number of researchers have found
that if you consider only childless women, the wage gap disappears. June
O'Neill, an economist who has probably studied wage gaps as much as anyone
alive, has found that single, childless women make about 8 percent more than
single, childless men do (though the advantage vanishes when you factor in
education). Using Census Bureau data of pay levels in 147 of the
nation's 150 largest cities, the research firm Reach Advisors recently showed
that single, childless working women under 30 earned 8 percent more than their
male counterparts did.

That's
likely to change as soon as the children arrive. Mothers, particularly those
with young children, take more time off from work; even when they are working,
they're on the job less. Behind the Pay Gap found that "among women who
graduated from college in 1992–93, more than one-fifth (23 percent) of mothers
were out of the work force in 2003, and another 17 percent were working part
time," compared with under 2 percent of fathers in each case. Other studies show
consistently that the first child significantly reduces a woman's earnings and
that the second child cuts them even further.

The
most compelling research into the impact of children on women's careers and
earnings—one that also casts light on why women are a rarity at the highest
levels of the corporate and financial world—comes from a 2010 article in the
American Economic
Journal by Marianne Bertrand of the University of Chicago and Claudia Goldin and
Lawrence Katz of Harvard. The authors selected nearly 2,500 MBAs who graduated
between 1990 and 2006 from the University of Chicago's Booth School of Business
and followed them as they made their way through the early stages of their
careers. If there were discrimination to be found here, Goldin would be your
woman. She is coauthor of a renowned 2000 study showing that blind auditions
significantly increased the likelihood that an orchestra would hire female
musicians.

Here's
what the authors found: right after graduation, men and women had nearly
identical earnings and working hours. Over the next ten years, however, women
fell way behind. Survey questions revealed three reasons for this. First and
least important, men had taken more finance courses and received better grades
in those courses, while women had taken more marketing classes. Second, women
had more career interruptions. Third and most important, mothers worked fewer
hours. "The careers of MBA mothers slow down substantially within a few years of
first birth," the authors wrote. Though 90 percent of women were employed
full-time and year-round immediately following graduation, that was the case
with only 80 percent five years out, 70 percent nine years out, and 62 percent
ten or more years out—and only about half of women with children were working
full-time ten years after graduation. By contrast, almost all the male grads
were working full-time and year-round. Furthermore, MBA mothers, especially
those with higher-earning spouses, "actively chose" family-friendly workplaces
that would allow them to avoid long hours, even if it meant lowering their
chances to climb the greasy pole.

In
other words, these female MBAs bought tickets for what is commonly called the
"mommy track." A little over 20 years ago, the Harvard Business Review published
an article by Felice Schwartz proposing that businesses make room for the many,
though not all, women who would want to trade some ambition and earnings for
more flexibility and time with their children. Dismissed as the "mommy track,"
the idea was reviled by those who worried that it gave employers permission to
discriminate and that it encouraged women to downsize their
aspirations.

But as
Virginia Postrel noted in a recent Wall Street Journal article, Schwartz had it
right. When working mothers can, they tend to spend less time at
work. That
explains all those female pharmacists looking for reduced hours. It explains why female lawyers are
twice as likely as men to go into public-interest law, in which hours are less
brutal than in the partner track at Sullivan & Cromwell.
Female medical students tell researchers that they're choosing not to become
surgeons because of "lifestyle issues," which seems to be a euphemism for
wanting more time with the kids. Thirty-three percent of female
pediatricians are part-timers—and that's not because they want more time to play
golf.

In the
literature on the pay gap and in the media more generally, this state of affairs
typically leads to cries of injustice. The presumption is that women pursue
reduced or flexible hours because men refuse to take equal responsibility for
the children and because the United States does not have "family-friendly
policies." Child care is frequently described as a burden to women, a
patriarchal imposition on their ambitions, and a source of profound inequity.
But is this attitude accurate? Do women want to be working more, if only the
kids—and their useless husbands—would let them? And do we know that more
government support would enable them to do so and close the wage
gap?

Actually,
there is no evidence for either of these propositions. If women work fewer hours
than men do, it appears to be because they want it that way. About two-thirds of
the part-time workforce in the United States is female.
According to a 2007 Pew
Research survey, only 21 percent of working mothers with minor children want to
be in the office full-time. Sixty percent say that they would prefer to work
part-time, and 19 percent would like to give up their jobs altogether. For
working fathers, the numbers are reversed: 72 percent want to work full-time and
12 percent part-time.

In
fact, women choose fewer hours—despite the resulting gap in earnings—all over
the world. That
includes countries with generous family leave and child-care
policies. Look at
Iceland, recently crowned the world's most egalitarian nation by the World
Economic Forum. The country boasts a female prime minister, a
law requiring that the boards of midsize and larger businesses be at least 40
percent female, excellent public child care, and a family leave policy that
would make NOW members swoon. Yet despite successful efforts to get men to take
paternity leave, Icelandic women still take considerably more time off than men
do. They also are far more likely to work part-time. According to the Organisation for
Economic Co-operation and Development (OECD), this queen of women-friendly
countries has a bigger wage gap—women make 62 percent of what men do—than the
United States does.

Sweden, in
many people's minds the world's gender utopia, also has a de facto mommy track.
Sweden has one of the highest proportions of working women in the world and a
commitment to gender parity that's close to a national religion. In addition to
child care, the country offers paid parental leave that includes two months
specifically reserved for fathers. Yet moms still take four times as much leave
as dads do. (Women are also more likely to be in lower-paid public-sector jobs;
according to sociologist Linda Haas, Sweden has "one of the most sex-segregated
labor markets in the world.") Far more women than men work part-time; almost
half of all mothers are on the job 30 hours a week or less. The gender wage gap among full-time
workers in Sweden is 15 percent. That's lower than in the United
States, at least according to the flawed data we have, but it's hardly the
feminist Promised Land.

The
list goes on. In the
Netherlands, over 70 percent of women work part-time and say that they want it
that way. According to the Netherlands Institute for Social
Research, surveys found that only 4 percent of female part-timers wish that they
had full-time jobs. In the United Kingdom, half of female GPs work part-time,
and the National Health Service is scrambling to cope with a dearth of doctor
hours. Interestingly
enough, countries with higher GDPs tend to have the highest percentage of women
in part-time work. In fact, the OECD reports that in
many of its richest countries, including Denmark, Sweden, Iceland, Germany, the
U.K., and the U.S., the percentage of the female workforce in part-time
positions has gone up over the last
decade.

So it
makes no sense to think of either the mommy track or the resulting wage
differential as an injustice to women. Less
time at work, whether in the form of part-time jobs or fewer full-time hours, is
what many women want and what those who can afford it tend to choose. Feminists
can object till the Singularity arrives that women are "socialized" to think
that they have to be the primary parent. But after decades of feminism and
Nordic engineering, the continuing female tropism toward shorter work hours
suggests that that view is either false or irrelevant. Even the determined
Swedes haven't been able to get women to stick around the
office.

That
doesn't mean that the mommy track doesn't present a problem, particularly in a
culture in which close to half of all marriages break down. A woman can have a baby, decide to
reduce her hours and her pay, forgo a pension, and then, ten years later, watch
her husband run off with the Pilates instructor. The problem isn't what it used
to be when women had fewer degrees and less work experience during their
childless years; women today are in better shape to jump-start their careers if
need be. The risk remains, however.

It's
not at all clear how to solve this problem or even if there is a solution,
especially during these fiscally challenged days. But one thing is clear: the
wage-gap debate ought to begin with the mommy track, not with proofy
statistics.

Ms.
Hymowitz is a contributing editor of City Journal, the William E. Simon Fellow
at the Manhattan Institute, and the author of Manning Up: How the Rise of Women
Has Turned Men into Boys.

wsj
AUGUST 26, 2011

France Gets Buffetted

There's
no tea party in Paris.

France's
richest woman pulled a Warren Buffett last Tuesday and asked her indebted
government to extract more taxes from its wealthiest citizens. A day later the
government complied, and then some.

L'Oreal
heiress Liliane Bettencourt's open letter, co-signed by 15 of her super-rich
countrymen, called for higher but "reasonable" levies on "the most favored
French taxpayers." Ms. Bettencourt is the billionaire who made headlines last
year over alleged tax evasion.

Among
her co-signatories was the CEO of French bank and erstwhile AIG counterparty,
Société Générale. The financial giant enjoyed its own dose of taxpayer largesse
at the height of the panic thanks to the New York Federal Reserve's 2008 pay-off
for banks' AIG insurance contracts. Americans didn't get a shout-out in the
moguls' letter on Tuesday, though it sounds as if President Obama wouldn't
object. The signatories explained that "We are aware of having fully benefited
from a French model and a European environment to which we are committed and
which we want to help preserve."

The
next day Prime Minister François Fillon followed their advice and proposed
a new 3% levy on
incomes above €500,000 ($722,400). The tax hike would be part of
the government's plan to raise the €12 billion it needs to meet its deficit
targets for 2011 and 2012, after it downgraded its growth forecasts for this
year and next.

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Associated
Press

L'Oreal
heiress Liliane Bettencourt

If
parliament approves the proposal, the new levy would go on top of France's
existing 41% top marginal income-tax rate. Mr. Fillon also suggested
increasing long-term capital-gains-tax rates by up to 10%, and nudging up the
social-security take on capital gains for the second time this
year.

The
plan would also raise consumption taxes on tobacco, hard liquor and soft drinks.
To round out this windfall for government, Mr. Fillon called for applying
France's 19.6% value-added tax rate to amusement-park admission
fees.

The
measures include no new spending cuts and address none of the regulations that
make it so difficult for the French to climb up the income (and tax) ladder.
The country suffers
from the fifth-highest minimum wage in the European Union and labor laws
that make it prohibitively expensive to fire (and thus hire) French workers.

Instead,
the new proposals would further discourage work by capping some of the tax
exemptions on overtime pay that Nicolas Sarkozy introduced in 2007. So much for
one of the few pro-growth promises the French president kept: the near-abolition
of the 35-hour workweek.

Like
Mr. Buffett, Madame Bettencourt is already very rich—in her case, thanks to her
father, whose cosmetics company predates the French welfare state by several
decades. If she wants to give her money to the French state, she's welcome to do
so. But a better public service would be calling for reforms that make it easier
for today's entrepreneurs to earn, and create, the wealth that once helped make
France great.

AUGUST
29, 2011

An Entrepreneurial Fix for the U.S. Economy

Several
reforms can make it faster and easier for new business
startups.

Virtually
everyone knows the U.S. and global economies are in serious trouble. We're in
uncharted territory. Having tried conventional macroenonic tools, we are now out
of ways to stimulate growth in private-sector demand, which is flat and shows no
signs of picking up any time soon.

The
recent political dysfunction over lifting the debt ceiling offers little to no
hope that any deals on short-term stimulus or fundamental changes in our tax
code and entitlement programs can be quickly enacted.

The Fed
may try a third round of quantitative easing. But with consumers and business
scared by the outlook and the sickening decline in stock prices, any QE3 is
likely to be pushing on the proverbial string.

Europe
is lurching from rescue to rescue, trying to avoid the inevitable—a
restructuring of the sovereign debt of several of its members, coupled with a
government rescue of troubled European banks.

The
emerging market economies that were rapidly growing have run into a wall,
needing to fight inflation before it gets out of control. As this happens, the
one bright spot in the world economy will dim.

It is
tempting to sit back and accept the verdict of some economists who rightly point
out that a massive deleveraging is inevitable, will take time and be painful.
But policy makers have a responsibility to help limit the pain and help lay the
groundwork for renewal.

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Getty
Images/Illustration Works

While
our two companies run very differently, we have come together to support what we
believe is the only set of ideas that stand a chance of turning things
around—ideas that can pass political muster in an otherwise very deeply divided
Congress. These ideas center on reinvigorating what up to recently has been the
most reliable source of job growth and innovation in our economy—the formation
of new firms.

GenOn
is one of the nation's largest operators of electric generating plants. Without
new, growing companies and the people they employ, the demand for electricity
will not generate growing profits for our company.

The
Principal Financial Group provides employee benefit programs to 100,000 growing
businesses employing six million U.S. workers. That includes services to nearly
800 employee-owned businesses. We know growing businesses are the real job
creators in our economy today.

In our
view, there is no hope of giving consumers renewed confidence in America unless
governments at all levels mount a vigorous effort to get rid of rules that
discourage entrepreneurs from launching and growing new businesses.

The
Kauffman Foundation recently proposed a way to do that with a set of ideas aptly
called the Startup Act. Those ideas, which would cost the government virtually
nothing, include:

•
Letting in immigrant entrepreneurs who hire American
workers.

•
Reducing the cost of capital through capital gains tax relief for early stage
investments.

•
Reducing barriers to IPOs by allowing shareholders to opt out of
Sarbanes-Oxley.

•
Charging higher fees for patent applicants who want quick decisions to remove
the backlog of applications at the Patent Office.

•
Giving licensing freedom to academic entrepreneurs at universities to accelerate
the commercialization of their ideas.

•
Having the government provide data to permit rankings of startup friendliness of
states and localities.

•
Regular sunsets for regulations and a consistent policy of putting new ones in
place only if their benefits exceed their costs.

There
is no time to waste. The president must meet as soon as possible with
congressional leaders to develop a menu of policy initiatives to reignite the
startup job machine. Despite the deep divisions on taxes and spending, there is
overwhelming support in this country for letting entrepreneurs work their magic
without excessive government interference.

Other
nations look to the United States as a model for new company formation. Our
Treasury debt may not be as valued as it once was, but we can't let our
entrepreneurship brand be tarnished.

We
realize America's larger businesses have their own agendas and ideas for moving
our country forward. But all of us know where the energy that drives our economy
comes from—new companies with new ideas that build confidence and optimism. We
will all profit when our elected leaders understand and act on this fundamental
fact too.

Mr.
Muller is CEO of GenOn Energy. Mr. Zimpleman is president and CEO of the
Principal Financial Group.

For Wal-Mart, a Rare Online Success

Wal-Mart
Stores Inc. has stumbled often in Internet retailing, but the big-box
granddad has been surprisingly successful in one online venture: digital movie
downloads.

A year
after buying streaming service Vudu, which lets customers rent or buy digital
versions of Hollywood movies, the operation has become the third most popular
such service, according to researcher IHS Inc. The
jump put Vudu ahead of similar offerings from Amazon.com
Inc. and Sony
Corp.

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With a
share of 5.3% at the end of the first half, Vudu still trails far behind Apple
Inc.'s iTunes service in the fast-growing movie-download business. ITunes
dominated the market with a 65.8% share, while Microsoft
Corp.'s Zune Video Marketplace was No. 2 at 16.2%. And analysts have questioned
whether Vudu has the legs to reach Wal-Mart's core customers.

Vudu
could become Wal-Mart's biggest Internet-related success to date—though that
doesn't say much.

The
Bentonville, Ark., retailer this month said it was ending sales of MP3 music
downloads, after failing for years to make a splash. The company also recently
announced a management shake-up for its Internet retail operations and the
departure of two top online executives, amid continued disappointing performance
compared with Amazon.

"The
business we're in today, offering first-run movies a la carte, is doing very
well right now and has tripled so far this year," Vudu General Manager Edward
Lichty said.

"It's
becoming very meaningful for our Hollywood partners, to the point where some
have called us and asked whether we had made some kind of mistake" when the
company reported surprisingly high sales, Mr. Lichty said.

View
Full Image

Vudu

Vudu
at first staked its future on streaming movies through its own set-top boxes. It
altered its business plan as consumers opted to watch through other
devices.

Amazon,
Sony and Apple weren't available for comment.

Vudu's
model is different from that of Netflix Inc., which charges customers a
monthly fee for unlimited access to a wide library of movies on DVD and via
streaming but doesn't offer digital downloads to
own.

Vudu's
prices vary according to the movie. The animated film "Rio," a typical example,
costs $3.99 to rent and $14.99 for a permanent digital copy. The high-definition
version of "Rio" costs $4.99 to rent and $19.99 to own. The prices generally are
competitive.

Wal-Mart
purchased Vudu last year for a reported $100 million, which looks like a bargain
in light of this year's rising valuations for Silicon Valley
start-ups. In
recent weeks, the company has integrated Vudu movies into the Walmart.com
website while keeping the Vudu.com site active. The retailer also launched a format
that allows owners of tablets, like the iPad, easily to view movies through
their Web browsers. The tablet-friendly format allows Wal-Mart to avoid the 30%
cut Apple collects from content sold through its App
Store.

Before
the acquisition, Vudu
had developed a strong reputation among movie buffs, particularly for its
high-definition content. It also had rights deals in place with
most Hollywood studios, so Wal-Mart avoided having to negotiate them from
scratch.

Vudu
initially staked its future on streaming movies to consumers through its own
set-top boxes. The growing popularity of videogame consoles and television sets
that give customers access to movie downloads expanded Vudu's potential
audience, and forced Vudu to alter its business plan.

Wal-Mart
has the capital to make such growing pains irrelevant. But analysts said the
retailer, whose DVD sales are evaporating, still has a long way to go to coax
its core customers to migrate to Vudu.

Analysts
also said Wal-Mart needs to find more ways to use online movies to drive
customers to the company's core retail offerings, something the company did to
great effect by selling low-priced DVDs, sometimes at a
loss.

The
Vudu strategy indicates the company understands the market, since Wal-Mart is
establishing a presence where customers want to watch movies, such as on
tablets, said Dan Cryan, senior analyst at IHS. "What's not as clear is how you
tie that back into Wal-Mart's core business."

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The Wealth of Asians

Wander into any luxury-goods store and there
they are: Asia's new rich. The phenomenal rise of personal wealth in the
fast-growing region may be an old story, but a new report from brokerage CLSA
suggests we ain't seen nothing yet. In Asia ex-Japan, there are currently "only"
1.2 million high-net-worth individuals, defined as those with investable assets
excluding homes of $1 million or more. This accounts for about 0.06% of the
region's population, but within five years there may be 2.8 million, or 0.13% of
the population.

Retailers already salivate over these
soon-to-be-rich Asians. Social-justiceniks at development banks and the like
will fret about growing inequality. But the most consequential question of all
is not whether more and more Asians will join the ranks of the world's
super-rich, but rather how they'll do it.

Rising net worth ought to be a sign that a
growing number of individuals are spotting productive economic opportunities and
profiting handsomely in return for the big entrepreneurial risks they've taken.
That's certainly how the likes of Steve Jobs or Richard Branson made their
billions in the West. There's also a fair share of that in
Asia.

But it's also true—and troubling—that so much
wealth-creation in the region is related to various forms of government
patronage. There are the Hong Kong tycoons who benefit from favorable government
land-sale rules, or the Korean chaebol executives who gain from lenient
treatment "for the national economic interest" when corporate fraud allegations
pop up. China is especially notable for being an environment where friendly
connections with government officials can pave the way through a bureaucratic
labyrinth, even easing access to capital that's scarce for purely private-sector
enterprises.

In a modern free economy it's false to suggest
that the wealth of one entrepreneur impoverishes others—the pie can grow for
everyone even if it grows faster for some. But wealth amassed through collecting
government favors often does impoverish others: those who don't enjoy
similar benefits. This fact, and the cynicism it breeds, is a greater threat to
social stability than unequal wealth distribution.

Beijing in particular should be concerned about
the ramifications of all this. CLSA estimates 900,000 Chinese will join the
high-net-worth set in the next five years. Whether they get there through
entrepreneurial gumption or government connections will determine how
sustainable China's rise is, and how stable its society will
be.

Americans are driving less. They traveled a
total of 259.1 billion miles on U.S. roads in June, down 1.4%, or 3.8 billion miles, from a
year earlier. That marked the fourth consecutive year-over-year decline.
The reduced driving was probably in large part a response to higher gasoline
prices, but a souring economy also may have played a role.

Food
stamp rolls declined by 0.5% in June to a still-high 45.2 million, the
Department of Agriculture said Friday. It was the first decline since October
2008 and likely reflects declining disaster assistance to states like Alabama
rather than improvements in household finances.

Alabama
was hit by tornadoes in late April that sent the number of food assistance
recipients soaring in May. Because disaster-assistance declined in June, it
lowered the national tally. The number of recipients in the food stamp program,
formally known as the Supplemental Nutrition Assistance
Program (SNAP), may continue to rise in coming months as
families continue to struggle with high unemployment and other natural
disasters.

“As we
continue to create jobs and grow the economy, we anticipate that participation
in SNAP will decline, which is everyone’s goal,” the USDA said in a statement.
“However, future participation in SNAP will likely be impacted by state natural
disaster requests as American families continue to recover from recent
storms.”

In
June, 14.6% of the U.S. population relied on food stamps. Food stamp rolls have
risen 9.5% in the past year, though recent months show the pace of growth is
slowing.

Wsj SEPTEMBER 6, 2011

Washington's Antitrust Timewarp

Blocking the
AT&T-T-Mobile merger won't protect jobs.

The Obama
administration's suit to block AT&T's acquisition of T-Mobile will harm, not
help, our sputtering economy. The administration claims the acquisition "would
result in tens of millions of consumers . . . facing higher prices, fewer
choices and lower quality products for mobile wireless services." It argues that
stopping the buyout "will help protect jobs in the economy" since mergers
usually reduce jobs through the elimination of
redundancies.

The first of these
claims has no factual basis—indeed, the market believes otherwise. The second is
indefensible as social policy.

It is very
difficult at an abstract level to know what the effects of a merger or
acquisition will be on competition within an industry. Firms may merge to create
market power and increase prices, though they may also merge to create
efficiencies that lower prices.

The Justice
Department presumes that the acquisition of T-Mobile (the fourth largest
wireless provider) by AT&T (the second largest) will lead to "higher prices
. . . and lower quality products" based on the high market share that would
result. But market share is a very rough proxy for market power and essentially
meaningless in a network industry.

There are strong
reasons to predict that AT&T's acquisition will lower prices and improve
product quality. First, there's lots of competition in the wireless market.
Prices have been declining progressively over time. There are many local market
competitors with discount and pre-paid plans. There is clearly an economic
reason that T-Mobile's parent, Deutsche Telekom, has no further interest in the
American wireless market. If there were great profits to be made because of lack
of competition, Deutsche Telekom wouldn't be selling
T-Mobile.

Second, the best
evidence of the prospective effect of a proposed acquisition is the response of
competitors that will face the combined firms. The chief competitor, Sprint, the
third largest wireless company, has been lobbying to stop the merger from its
first announcement.

If the acquisition
would lead to increased prices and lower quality products as the Justice
Department has claimed, Sprint would be better off after the acquisition. Sprint
would be able to add subscribers, not lose them, because of AT&T's higher
prices and lower quality. Sprint would oppose the acquisition—as it has—only if
it thought that the merger would put it in a worse position by increasing the
competitive pressures that it already faces.

The market—though
not the Obama administration—understands this point. On the day that the Justice
Department announced its opposition to the acquisition, Sprint's share price
rose 5.9%, reflecting investors' belief that Sprint will be in a better
competitive position without the acquisition.

The Obama
administration's emphasis on job maintenance is even more confused. The
administration has argued that the acquisition should be opposed because mergers
reduce employment by eliminating redundant jobs. But a sound economy is not
built on redundant jobs. An economy becomes stronger as redundant jobs are
eliminated, costs and prices reduced, and the effective wealth of the nation
enhanced. A major reason that the Obama administration's efforts to stimulate
the economy have failed is that it has consistently poured money into
negative-value investments.

Much of the Justice
Department's failing on this issue derives from its failure to understand that
network industries must be evaluated differently from more traditional,
manufacturing industries. The market share guidelines upon which the Justice
Department relies to oppose this acquisition may make sense in the context of
manufacturing industries. But they make no sense in the context of networks in
which there are great benefits from large networks with large market shares.

This was the
mistake the Justice Department made in the Microsoft case almost a decade ago.
It wanted to break up Microsoft, supposedly to create greater competition among
Web browsers. The courts prevented the effort, and to good effect.

The rise of Google,
Facebook and the competition from smartphones that resemble computers have shown
that the focus then on browser competition misunderstood the rapidly changing
nature of network competition. The Obama administration is making the same
mistake with its opposition to AT&T's acquisition of
T-Mobile.

Mr. Priest teaches law and economics at Yale
Law School.

wsj
SEPTEMBER 3, 2011

Can the World Still Feed Itself?

Yes,
says Nestle's chairman Peter Brabeck-Letmathe, but not if we burn food for fuel,
fear genetic advances and fail to charge for water.

As
befits the chairman of the world's largest food-production company, Peter
Brabeck-Letmathe is counting calories. But it's not his diet that the chairman
and former CEO of Nestlé is worried about. It's all the food that the U.S. and
Europe are converting into fuel while the world's poor get
hungrier.

"Politicians,"
Mr. Brabeck-Letmathe says, "do not understand that between the food market and
the energy market, there is a close link." That link is the calorie.

The
energy stored in a bushel of corn can fuel a car or feed a person. And
increasingly, thanks to ethanol mandates and subsidies in the U.S. and biofuel
incentives in Europe, crops formerly grown for food or livestock feed are being
grown for fuel. The U.S. Department of Agriculture's most recent estimate
predicts that this year, for the first time, American farmers will harvest more
corn for ethanol than for feed. In Europe some 50% of the rapeseed crop is going
into biofuel production, according to Mr. Brabeck-Letmathe, while "world-wide
about 18% of sugar is being used for biofuel today."

In one
sense, this is a remarkable achievement—five decades ago, when the global
population was half what it is today, catastrophists like Paul Ehrlich were
warning that the world faced mass starvation on a biblical scale. Today, with
nearly seven billion mouths to feed, we produce so much food that we think
nothing of burning tons of it for fuel.

Or at
least we think nothing of it in the West. If the price of our breakfast cereal
goes up because we're diverting agricultural production to ethanol or biodiesel,
it's an annoyance. But if the price of corn or flour doubles or triples in
the Third World, where
according to Mr. Brabeck-Letmathe people "are spending 80% of [their] disposable
income on food," hundreds of millions of people go hungry.
Sometimes, as in the Middle East earlier this year, they
revolt.

"What
we call today the Arab Spring," Mr. Brabeck-Letmathe says over lunch at Nestle's
world headquarters, "really started as a protest against ever-increasing food
prices."

Mr.
Brabeck-Letmathe has extensive experience at the intersection of food, politics
and development. He spent most of his first two decades at Nestlé in Latin
America. In 1970, he was posted to Chile, where Salvador Allende's socialist
government was threatening to nationalize milk production, and Nestlé's Chilean
operations along with it. He knows that most of the world is not as fortunate as
we are.

Enlarge
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Terry
Shoffner

"There
is a huge difference," he says, "between how we live this crisis and what the
reality of today is for hundreds of millions of people, who we have been pushing
back into extreme poverty with wrong policy making." First there's the biofuels
craze, driven by concerns over energy independence, oil supplies, global warming
and, ironically, Mideast political stability.

Add to
that, especially in Europe, a paralyzing fear of genetically modified crops, or
GMOs. This refusal to use "available technology" in agriculture, Mr.
Brabeck-Letmathe contends, has halted the multi-decade rise in agricultural
productivity that has allowed us, so far, to feed more mouths than many people
believed was possible.

Then
there is demographics. Recent decades have seen "the creation of more than a
billion new consumers in the world who have had the opportunity to move from
extreme poverty into what we would call today a moderate middle class," thanks
to economic growth in places like China and India. This means a billion people
who have "access to meat" for the first time, Mr. Brabeck-Letmathe says.

"And
the demand for meat," he says, "has a multiplier effect of 10. You need 10 times
as much land, 10 times as much [feed], 10 times as much water to produce one
calorie of meat as you do to have one calorie of vegetables or
grain." Even
so, we are capable of satisfying this increased demand—if we choose to. "If
politicians of this world really want to tackle food security," Mr.
Brabeck-Letmathe says, "there's only one decision they have to make: No food for
fuel. . . . They just have to say 'No food for fuel,' and supply and demand
would balance again."

If we
don't do that, we can never hope to square the drive for biofuels with the
world's food needs. The calories don't add up. "The energy market," Mr.
Brabeck-Letmathe argues, "is 20 times as big, in calories, as the food market."
So "when politicians say, 'We want to replace 20% of the energy market through
the food market,'" this means "we would have to triple food production" to meet
that goal—and that's before we eat the first kernel of what we've
grown.

Even if
we could pull this off, we will never get there by turning our backs on
genetically modified crops and holding up "organic" food as the new gold
standard of safety, purity and health. Organic production is all the rage in the
rich West, but we can't "feed the world with this stuff," he says. Agricultural
productivity with organics is too low.

"If you
look at those countries that have introduced GMOs," Mr. Brabeck-Letmathe says,
"you will see that the yield per hectare has increased by about 30% over the
past few years. Whereas the yields for non-GMO crops are flat to slightly
declining." And that gap, he says, "is a voluntary gap. . . . It's just a
political decision."

And
it's one thing for rich, well-fed Europe to say, as Mr. Brabeck-Letmathe puts
it, "I don't want to produce GMO [crops] because frankly speaking I don't want
to produce so much food." That, he says, he can understand.

What's
harder for him to understand is that Europe's policies effectively forbid poor
countries in places like Africa from using genetically modified seed. These
countries, he says, urgently need the technology to increase yields and
productivity in their backward agricultural sectors. But if they plant GMOs,
then under Europe's rules the EU "will not allow you to export
anything—anything. Not just the [crop] that has GMO—anything," because of
European fears about cross-contamination and almost impossibly strict purity
standards. The European fear of genetically modified crops is, he says, "purely
emotional. It's becoming almost a religious belief."

This
makes Mr. Brabeck-Letmathe, a jovial man with a quick smile, get emotional
himself. "How many people," he asks with a touch of irritation, "have died from
food contamination from organic products, and how many people have died from GMO
products?" He answers his own question: "None from GMO. And I don't have to ask
too long how many people have died just recently from organic," he adds,
referring to the e. coli outbreak earlier this year in
Europe.

Nestlé
itself has at times been painted as an enemy of the world's poor—for 30 years it
has contended with a sporadic boycott movement over the sale and marketing of
infant formula in the Third World, a push that some rich Westerners find
unethical. On the other hand, under Mr. Brabeck-Letmathe, Nestlé's corporate
strategy has emphasized that all food markets are intensely local. Americans may
increasingly buy all drinks by the gallon and chocolate bars by the pound, but
in many parts of the world a trip to the store might yield a single Maggi
cube—the Nestlé-made bullion cubes that are ubiquitous in many countries. In
these countries, single servings of many products are sold in little foil
packets to allow people to match their spending to their cash
flow.

This
is, Mr. Brabeck-Letmathe contends, an extension of Nestlé's original reason for
being. Nestlé exists, Mr. Brabeck-Letmathe says, because as Europe's population
"urbanized," as people moved to the cities and traded their ploughshares for
time cards, "somebody had to ensure that people" who worked 12 hours a day in a
factory could feed themselves. For the first time in history, "you need[ed] a
food industry. You need[ed] somebody who takes a product, who treats it so that
its shelf life allows it to be transported, to be brought into the consumption
center. That's why we have canning, that's why we have pasteurization, that's
why we have all these things."

The
vast majority of us would have no idea any longer how to feed ourselves if we
turned up one day to find the supermarket empty. We rely on industrialized food
production, distribution, preservation and storage to make our urban lifestyles,
our very lives, possible. And "it was not the state that took care of this
thing. It was private initiative." Today, Nestlé employs some 300,000 people,
takes in some $100 billion a year in revenue—and yet represents just 1.5% of a
global food industry that feeds billions.

But for
private initiative to work that kind of miracle, you need a market. Mr.
Brabeck-Letmathe even worries about the absence of a functioning market for
water. Some 98.5% of the fresh water the world uses every year goes to
agricultural or industrial use. And in most cases, there is no market for how
that water is allocated and used. The result is waste, overuse and misuse of the
water we have. If we don't do something about that, Mr. Brabeck-Letmathe fears,
we will soon run ourselves dry.

Up to
now, he says, our response to water shortages has focused "on the supply-side":
We build another dam, or a canal to bring water from one place to another. But
"the big issue," he contends, "is on the demand side," and the "best regulator"
of demand is prices.

"If oil
becomes scarce," he notes, "the oil price goes up. But if water does, well, we
still pump the same amount. It doesn't matter because it doesn't cost. It has no
value." He drives this point home by connecting it back to biofuels: "We would
never have had a biofuel policy—never," he contends, "if we would have given
water any value." It takes, Mr. Brabeck-Letmathe says, "9,100 liters of water to
produce one liter of biodiesel. You can only do that because water has no
price."

He
cites Spain as an example of an agricultural sector in need of adjustment. "The
total [output] of the Spanish agricultural system," he says, "is less in value
than the subsidies they receive between the Common Agricultural Policy, the
subsidies for tax relief, the subsidies for water."

'Take
away the emotion of the water issue," Mr. Brabeck-Letmathe argues.
"Give the 1.5% of the
water [that we use to drink and wash with], make it a human right. But give me a
market for the 98.5% so the market forces are able to react, and they will be
the best guidance that you can have. Because if the market forces are there the
investments are going to be made."

The
world's population is projected to hit nine billion by mid-century, up from 6.7
billion today. So, can we feed all those people? Mr. Brabeck-Letmathe doesn't
hesitate. "We can feed nine billion people," he says, with a wave of the hand.
And we can provide them with water and fuel. But only if we let the market do
its thing.

Teamsters Sue Over Mexican-Truck Plan

WASHINGTON—The Teamsters union filed a lawsuit
against the Obama administration on Friday seeking to block the government's
plan to allow Mexican trucks back into the U.S., in a sign of the growing rift
between unions and the administration over trade.

The
suit challenges a deal the U.S. signed with Mexico in July to resolve a
longstanding dispute over cross-border trucking. The agreement ended a
two-decade-long ban on Mexican trucks entering the U.S.

The
North American Free Trade Agreement, signed in 1994, called for allowing Mexican
truckers into the U.S., but the International Brotherhood of Teamsters and
Democratic allies in Congress repeatedly used legislation to block access. Nafta
ruled in the late 1990s that Mexico could impose punitive tariffs, which it did
in 2009, affecting $2.4 billion in U.S. goods annually.

Earlier
this year, President Barack Obama and Mexican President Felipe Calderon jointly
unveiled their plan to resolve the dispute, including a reciprocal pilot program
that would allow Mexican trucks into the U.S. under certain
rules.

The
suit was filed Friday in the U.S. Court of Appeals for the Ninth Circuit in San
Francisco by the Teamsters and the nonprofit group Public Citizen against the
Department of Transportation and its Federal Motor Carrier Safety
Administration. The
complaint alleges that the pilot program sets standards that aren't stringent
enough for Mexican trucks and drivers. For example, the program waives a law
requiring trucks to display proof of meeting federal safety standards, said
Jonathan Weissglass, a lawyer for the
plaintiffs.

An
official for the Federal Motor Carrier Safety Administration said the Teamsters
haven't directly served the agency with a lawsuit. Once they do, the agency
"will review and address the filing," she said, adding that the pilot program
will begin within 30 to 60 days. The official declined to address the substance
of the suit.

U.S.
officials have said the deal would hold Mexican truckers to high safety
standards, and business groups have said it is important to make a deal with
Mexico because the retaliatory tariffs are costing the U.S.
jobs.

The
Obama administration has also clashed with some of its labor supporters over
proposed free-trade deals with South Korea, Colombia and
Panama.

The
Teamsters allege the trucker program is faulty because it contains certain
standards that are impossible for Mexico to meet. Mexico won't be able to
provide comparable access to U.S. trucks, as required, because ultra-low-sulfur
diesel fuel isn't widely enough available there, the lawsuit
alleges.

Mr.
Weissglass, a partner at San Francisco law firm Altshuler Berzon LLP, said this
fuel is required for trucks in the U.S. to achieve better engine efficiency and
emissions controls. Shifting to another fuel after using this one could cause
engine damage and violate truck-manufacturer warranties, he
said.

The
Teamsters also said Mexican truckers have less-stringent vision requirements
than truckers in the U.S., which will allegedly violate the pilot program's
requirement for equivalent trucker safety in the two
countries.

Teamsters
President Jim Hoffa likened the pilot program to allowing guest workers into the
country at a time of high U.S. unemployment.

"The
last thing America needs right now is a guest worker program on wheels. We
created zero jobs last month," he said, referring to the U.S. unemployment
report issued Friday.

By now, you’ve probably
heard a bit about the Obama DOJ’s two raids on iconic American manufacturer
Gibson Guitars. The story has made headlines around the world as another
shocking example of how far the current administration is willing to take their
antipathy for successful businesses. If you need to get caught up, the Bigs have
broken news on this story, including two exclusive interviews with Gibson’s CEO
(one by me and a must-hear interview by Dana
Loesch) plus an important
piece by John Nolte (and this latest via RS McCain wherein Gibson’s CEO says the
government told him not to use American
labor.)

As much
as the Obama Administration deserves scorn for their overzealous prosecution,
I’ve been researching the background of this story and have found that there’s
another culprit –
the entire United States Congress and their passage of an amendment to The Lacey
Act back in 2008 that’s a prime example of an awful, anti-business law done in
the name of environmentalism.

When
you learn the details of the Lacey Act Amendments I think you’ll agree that they
need to repealed as soon as humanely possible.

The
amendments were passed in 2008 as part of the behemoth omnibus Farm
Bill.
The problem they were
trying to address was the deforestation in countries like Madagascar, where
‘exotic woods’ like rosewood and ebony come from.Some of these problems resulted from
political instability in the country, which created a grey market for these
woods where the new ruling governments looked the other way and profited from
the illegal wood harvest.

Where
is all this wood going? Interestingly, 95% of it is going to China – not for
re-export but for domestic use. The wealthy in China love rosewood and ebony
furniture. In
fact, the next time you hear a liberal attack the Koch Brothers or whatever
rich-person-of-the-moment that they want to attack, picture someone in China who sleeps
in an $800,000 bed. That’s not a misprint – if you want to see a
picture of what a nearly million dollar bed looks like, you might want to check
out this stylish report – it’s on Page 11. There’s a million dollar Chinese bed
on page 16, too. And the report makes mention of the first
Gibson raid on page 9.

So how
have papers like The New
York Times reported on this? Do you think they might possibly use
misleading or even blatantly false reporting to try and guilt out their
environmentally hip urban left wing readership? This is from
a 2010 article on their ‘Green Blog’…

..it is
not only the Chinese who covet the rich look of rosewood. Much of the furniture
gets exported to the United States and Europe. Some of it appears in the
polished contours of beautiful guitars.

Let’s
parse those three short sentences.

It’s
true – it’s not ONLY the Chinese who like rosewood. They are only responsible
for a mere 95% of it. And when the Times says ‘much of the
furniture’ gets exported to the U.S. and Europe…well, that’s not at all what the
report says. Go
look at top of Page 5, which uses the phrase ‘small quantities’. And to
finish – they mention guitars. You know, guitars like the ones Gibson
makes.

So, we
have the New York
Times providing false ideological cover and justification for the
Lacey Act amendments and their enforcement. The goal is to create a smokescreen
of false equivalence when, in fact, this is almost exclusively
a problem caused by the Chinese – and China doesn’t seem to have passed any laws
or made any agreements related to this issue at all. I looked
and I couldn’t find any.

Meanwhile,
the United States
Congress passed Amendments to the Lacey Act to put the hammer down on whatever
small part of the 5% that anyone in the United Starts is responsible
for. If the penalties weren’t so draconian it would be another
laughable example totally ineffective environmental symbolism. Remember, even if
the U.S. were to stop every single import of rosewood, it wouldn’t actually
solve whatever problem may exist in Madagascar at all.

How bad
are the Lacey Act Amendments?

While
China does nothing, the U.S. Congress saw fit to punish U.s
businesses with fines of $500,000 and jail sentences of 5 years. This can’t be
emphasized enough because it’s a real human consequence – the Federal Government
is on the verge of possibly putting the CEO of Gibson Guitars in prison and
doing enough economic damage to shut down the company for
good.

I’m not
even mentioning the new bureaucracy and paperwork requirements. I’m not going
into the fines of
$100,000 and a year in prison for unknowingly violating the Lacey Act
Amendments. I’m ignoring the cost to the taxpayers of this
enforcement. You can read all about those disgusting elements in the cartoony
Primer that your tax dollars paid for and you’ll see I’m not joking about
the cartoons.

The
consequences of this awful, ineffective law are no joke, either. It’s happening
to Gibson Guitars right now. I don’t grant the government the facts for second;
Gibson is innocent
until proven guilty and they haven’t even been charged. But remember what’s at
stake. A man might go to prison. People will lose their jobs. And the rosewood
of Madagascar will still be sent to China to make $1,000,000
beds.

Unless
…

Unless
we do something about it. Unless we draw a line in the sand and say enough.
Unless some politician or Presidential hopeful picks up on this as the perfect
example of government versus U.S. business. Herman Cain? Rick Perry? Rep.
Bachmann? Mitt Romney? Thad McCotter? Anyone?

wsj
SEPTEMBER 2, 2011

Is Google-Motorola the Next Antitrust Case?

These
companies, like AT&T, need mergers to survive obstacles that government
created.

The
Justice Department is going to court to stop the proposed merger of AT&T and
T-Mobile USA. Will the pending union of Google and Motorola suffer the same
fate?

At
first glance, the two mergers appear to have little in common. AT&T and T-Mobile are in the
same business, while Google and Motorola occupy different niches in the
telecommunications ecosystem. But AT&T and Google share a common problem:
Both are victims of bungled government regulation, and both need merger partners
to sustain competitive momentum in the face of federal
roadblocks. Indeed, it's unlikely that either would have risked
such intense antitrust scrutiny if the government had been doing its job
properly.

Justice
apparently believes that the AT&T/T-Mobile merger would inevitably mean less
competition—and therefore higher prices and lower quality—in the wireless
carrier market. We're
skeptical. For one thing, it's far from clear that T-Mobile is
viable any longer on its own: Deutsche Telekom, the carrier's parent, is
reportedly unwilling to make the huge investment T-Mobile needs to keep up with
rivals. For another, carrier concentration varies from locality
to locality, and some judicious divestiture of customers and spectrum would make
a big difference—which, one hopes, is all that the Justice Department is really
after.

Consider,
though, that the reason
AT&T was prepared to fight the uphill battle to obtain T-Mobile was its need
for spectrum to meet the exploding demand for broadband service in very
competitive markets, including New York and San Francisco. In a
better world (one in which more spectrum could be auctioned off and freely
traded), AT&T could have acquired what it needed without a merger with the
one major carrier with the spectrum that meets AT&T's needs. Yet the Federal Communications
Commission is dancing a painfully slow minuet with television broadcasters,
hoping to induce them to part with the excess spectrum they control (but are not
allowed to sell) with a combination of threats and promises of
cash.

Editorial
writer Mary Kissel on the Department of Justice's suit to block the AT&T and
T-Mobile merger.

Google,
for its part, faces a very different government-manufactured obstacle. The
giant's Android operating system, which is licensed to a dozen equipment makers
world-wide, is a runaway success. But, thanks to a government patent and
copyright system that is ill-equipped to navigate the modern and complex issues
of carving out rights in software, Google faces as-yet-unknown challenges to
ownership of the intellectual property that makes Android tick.

The
company reportedly is willing to pay a large fortune for Motorola only because
it would bring along thousands of patents that could be used to defend Android
from predators. Indeed, major wireless-device makers
including Sony, Samsung, LG and HTC are supporting the merger despite the fact
that it would raise the specter of favoritism for Motorola, because they fear
that Android would otherwise be hobbled by patent trolls and other
attackers.

There's
one last irony here. The controversies over both mergers
are largely based on concepts of antitrust that are as obsolete in a high-tech
environment as the government rules for allocating spectrum and parsing
intellectual property. In the AT&T case, the worry is
that a higher concentration in the market would give the company the discretion
to raise prices. With Google, the unease is that the owner of the Android
operating system would reserve the newest features for Motorola handsets.

In a
world of breakneck technological change, though, the far greater concern for the
feds and everyone else must be that micromanaging markets will slow
innovation. And
it is hard to think of an industry that has delivered more value more rapidly
than wireless communications—or one in which the potential for innovation is
greater.

While
it is fashionable these days to view regulation as the enemy of growth and
innovation, reality is more subtle. What's needed is not less government, but
nimbler government. One that understands when and how regulation can make
markets more competitive—and when it makes sense just to get out of the
way.

Mr.
Hahn is director of economics at the Smith School, Oxford, and a senior fellow
at the Georgetown Center for Business and Public
Policy.

The
Freelance Economy

Today,
careers consist of piecing together various types of work, juggling multiple
clients, learning to be marketing and accounting experts, and creating offices
in bedrooms/coffee shops/coworking spaces. Independent workers
abound. This transition is nothing less than a revolution, says Sara
Horowitz, the founder of Freelancers Union, a nonprofit organization
representing the interests and concerns of the independent
workforce.

Now,
employees are leaving the traditional workplace and opting to piece together a
professional life on their own.

·As of
2005, one-third of our workforce participated in this "freelance economy."

·Data
show that number has only increased over the past six years.

·Entrepreneurial
activity in 2009 was at its highest level in 14 years, online freelance job
postings skyrocketed in 2010 and companies are increasingly outsourcing work.

·While
the economy has unwillingly pushed some people into independent work, many have
chosen it because of greater flexibility that lets them skip the dreary office
environment and focus on more personally fulfilling projects.

These trends
will have an enormous impact on our economy and our society.
Consider:

·We
don't actually know the true composition of the new workforce -- after 2005, the
government stopped counting independent workers in a meaningful and accurate
way. Since policies and budget decisions are based on data, freelancers are not
being taken into account as a viable, critical component of the U.S. workforce.

·Jobs
no longer provide the protections and security that workers used to expect. The
basics ­ such as health insurance, protection from unpaid wages, a
retirement plan and unemployment insurance are out of reach for one-third of
working Americans.

·Our
current support system is based on a traditional employment model, where one
worker must be tethered to one employer to receive those benefits; it's time to
build a new support system that allows for the flexible and mobile way that
people are working.

WASHINGTON—A
patent-system overhaul nearly a decade in the making is expected to receive
final congressional passage this month, significantly altering how anyone with
an invention—from a garage tinkerer to a large corporation—will vie for
profitable control of that idea's future.

Enlarge
Image

Close

Everett
Collection

Philo
T. Farnsworth, inventor of the television, is seen focusing an early television
prototype, circa 1934.

Patent
Battles

Automobile:
George Selden was granted a patent for the automobile in 1895. Henry Ford
refused to pay and won his case on appeal in 1911.

FM
radio: Inventor Edwin H. Armstrong sued many companies he believed infringed
on his FM radio patents. He committed suicide in 1954.

The
bill, which passed a key Senate vote Tuesday and is expected to get President
Barack Obama's signature, will reverse centuries of U.S. patent policy by
awarding patents to inventors who are "first to file" their invention with the
U.S. Patent and Trademark Office. Currently the "first to invent" principle
reigns, which often spawns costly litigation between dueling inventors.

The
new system puts a premium on inventors with the wits—or deep pockets—to dash to
the patent office as soon as they discover something useful and nonobvious.

Many
big companies say that change will help forestall drawn-out disputes. "You'll
end up with a patent system that's more predictable and far more certain," said
Bob Armitage, general counsel of drug maker Eli Lilly & Co.

But
small inventors fear the first-to-file approach will cause companies to
overwhelm patent examiners with applications, a pace of activity individuals
can't afford to match. Critics include Raymond Damadian, the doctor who invented
magnetic resonance imaging technology and has said the MRI would never have been
invented under the proposed rules.

A
new bill that passed the Senate this week will overhaul centuries of U.S. patent
policy and award patents to inventors who are first to file. Amy Schatz reports
from Washington.

"This
is very, very harmful for small companies, and they're by and large completely
unaware of what's about to happen," said venture capitalist Gary Lauder. "The
biggest harm will come for companies ages zero to one." Right now, entrepreneurs
can talk to potential investors and others to gauge the potential for an
invention without much risk of the idea will be stolen, he said, and
first-to-file reduces that opportunity.

The
bill also includes provisions that larger companies have sought for years. They
will gain a new way to challenge patents that have just been granted, and the
U.S. Patent and Trademark Office will get the right to set its own fees and hire
more examiners.

That
could make getting a patent quicker. Currently, there's a three-year wait for
patent applications and some patent-office programs—such as a fast lane for
applicants that are willing to pay extra fees—are on hold because of funding
shortfalls.

"Is
it a perfect bill? No," said David Simon, associate general counsel at chip
maker Intel Corp., who estimated he has been working on
a patent overhaul for nine years. "But it has a lot of good steps forward that
will help things."

The
Senate voted 93 to five Tuesday to limit debate on the bill, which passed the
House in June. Aides said final passage could come by next week, and then the
bill would go to President Obama's desk for signature.

Mr.
Simon said the new challenge procedure may cut down on patents that shouldn't
have been granted and are now seldom tested until costly litigation has begun.

Another
provision, he said, would make it harder for patent holders to file blanket
suits against dozens of companies in dissimilar
industries.

Companies
like Intel that manufacture products have often found themselves at odds with
companies that live solely on their patents, sometimes buying and selling them
like stocks in a portfolio.

But
Intellectual Ventures, one of the best-known companies in the latter category,
said it generally supports the current version of the legislation, including the
post-patent review.

Matt
Rainey, the firm's chief counsel for intellectual-property policy, said the
bill's provisions giving the patent office more control over its own funding are
critical. "If we don't give the patent office the money it needs and the people
it needs to carry it out, it could be worse," he said.

Larger
companies argue that the change to a first-to-file system will make it easier
for companies by bringing the U.S. in line with Europe and Japan.

Already,
companies "should be running to the patent office as soon as they can because in
the rest of the world you have to," said Stuart Meyer, an intellectual property
partner at law firm Fenwick & West.

When
Canada instituted a similar change to "first to file" in 1989, the number of
individual inventors who filed patents dropped and didn't go back up in the
following years, according to new research by a pair of University of
Pennsylvania Law School professors.

"To
the extent we think the patent systems in the U.S. and Canada are similar, we
might expect to see a similar outcome in the U.S.," said David S. Abrams,
assistant professor of law, business and public policy at the University of
Pennsylvania Law School and a co-author of the study.

In
response to the complaints from the small business community, the legislation
sets up an ombudsman program to help start-ups and provides new discounts on
patent filing fees for small companies.

Passage
of the legislation would mark the end of a decade-long battle by companies to
persuade Congress to overhaul patent rules and jump-start the slow-moving Patent
and Trademark Office. Previous attempts to pass legislation died as various
industry groups haggled over details in the bill, but some of the largest
disagreements – such as how damages on patent cases are determined – have been
settled by the courts.

The
Senate passed an earlier version of the bill in March on a 95-5 vote. The House
passed its version 304-117 in June. The House bill—the same one the Senate voted
on Tuesday—creates a reserve fund for excess patent fees instead of allowing the
patent office to automatically keep all the fees its collects.

That
displeased some senators who believed the new system might continue to give
Congress the leeway to take patent fees and use the money elsewhere, but the
objections weren't enough to derail the bill in Tuesday's
vote.

Economic
View

How
to Make Business Want to Invest Again

By
N. GREGORY MANKIW

Published:
September 10, 2011

DURING
the last week, the nation has witnessed much partisan wrangling over the
economy. So it might be worth stepping back and assessing what we know and what
we don’t. Let’s start with five propositions about which there is little doubt:

Minh
Uong/The New York Times

Jeff
Sommer with Floyd Norris on President Obama, the Fed, and the economy; Greg
Mankiw on making business want to invest again; Louis Uchitelle on government
help for manufacturing; and David Gillen and Natasha Singer on commercializing
campus life.

•The economy is in bad
shape.
Technically, the recession ended in June
2009, and since then the economy has been recovering. But it doesn’t feel that
way to many Americans. Things have stopped getting worse, but they have not
gotten much better. The recovery has been so meager that unemployment lingers at
historically high levels.

•
The disappointing news
about job creation is closely linked to lackluster growth in
G.D.P.Economists call the relationship between growth and unemployment
“Okun’s Law,” after Arthur Okun, who studied it in the 1960s. In essence, Okun’s
Law says that to reduce the unemployment rate, we need for gross domestic
product to grow by more than its long-run average rate of about 3 percent. So
far in 2011, the growth rate has been less than 1 percent.

•The most volatile component of G.D.P.
over the business cycle is spending on investment goods. This
spending category includes equipment, software, inventory accumulation, and
residential and nonresidential construction. And the recent economic downturn
offers this case in point about the problem: From the economy’s peak in the
fourth quarter of 2007 to the recession’s official end, G.D.P. fell by only 5.1
percent, while investment spending fell by a whopping 34 percent.

•
The subpar recovery
has coincided with a historically weak investment
recovery.Compare our recent
experience with that of the early 1980s, when the nation last experienced a deep
economic downturn in which unemployment topped 10 percent. That recession ended
in the fourth quarter of 1982. In the subsequent two years, investment spending
grew by a total of 54 percent. By contrast, in the first two years of this
recovery, it grew by half that amount.

•While the sluggish housing market can
explain the slow pace of residential investment, it is not the whole
story. Business investment has also been weak. Over the last two
years, nonresidential fixed investment has grown by only 12 percent, whereas
during the two years after the 1982 recession, it grew by 27 percent. Similarly,
the narrow category of spending on business equipment and software fell more
than twice as much in this recession as it did in the 1982 recession, and it has
been slower to recover.

So
much for what we know for sure. Now comes the hard part: what to make
of these facts.

Advocates
of traditional fiscal stimulus often view low levels of investment as a symptom,
rather than a cause, of the weak recovery. Businesses are reluctant to invest,
they argue, because they lack customers eager to spend. If the government can
goose demand by handing out dollars to households short on cash, or by buying
goods and services directly, businesses will respond by expanding their own
spending as well.

Yet
fluctuations in investment spending, rather than being only a passive response,
are also one of the driving forces of the booms and busts of the business cycle.
The great economist John Maynard Keynes suggested that investment spending is in
part determined by the “animal spirits” of investors, which he described as “a
spontaneous urge to action rather than inaction.”Recessions occur when
optimism turns to pessimism, and businesses are reluctant to place bets on a
prosperous future. Recovery occurs when investor confidence
returns.

To be
sure, both points of
view may well be true. The relationship between investment
and the overall economy is what an engineer would call a positive feedback
loop. Greater business investment would increase hiring,
both by those who produce the investment goods and those who buy them. Greater
employment would mean more workers taking home paychecks, which in turn would
increase the overall demand for goods and services. When businesses saw more
customers coming through their doors, they would then increase investment
spending yet again.

WHAT
can policy makers do to stoke animal spirits and encourage businesses to invest?

One
obvious step would be a cut in the taxation of income from corporate capital.
According to a 2008
study by the Organization for Economic
Cooperation and Development, “Corporate taxes are found to be most harmful
for growth.” Tax reform that reduced the burden on capital income and
shifted it toward consumption would improve prospects for long-run growth and,
in so doing, encourage greater investment today.

Yet it
would be overly optimistic to think that any single public policy, by itself,
could lead to the kind of robust investment spending seen in previous
recoveries. Myriad government actions influence the expected future
profitability of capital. These include not only policies concerning taxation
but also those concerning trade and regulation.

For
example, passing the free trade
agreement with South Korea, which has languished in Congress more than four
years after first being negotiated, would be a step in the right direction. So
would reining in the National Labor Relations Board; its decision to block Boeing
from opening a nonunion plant in South Carolina may have been hailed by
organized labor, but it surely did not hearten investors.

Economists
often rely on the convenient shortcut of separating long-run and short-run
issues. Recessions are then viewed as short-run problems that require short-run
solutions. That approach, however, may be simplistic. Lack
of investment spending is a large part of the economy’s current difficulties,
but capital investments are always made with an eye toward the future.

The
best fix for our short-run problems may be to focus on policies that will foster
long-run growth as well.

N.
Gregory Mankiw is a professor of economics at Harvard. He is advising Mitt
Romney, the former governor of Massachusetts, in the campaign for the Republican
presidential nomination.

How
to Fight Black Unemployment

The
tragedy of the failed stimulus is felt hard in minority communities. There's a
better way.

Some
people actually believe government can create jobs by taxing and borrowing from
people with jobs and then giving that money to people without jobs. They call
this demand stimulus. To make matters worse, other people think these
demand-stimulus ideas warrant a serious response.

Government
taxes cigarettes to stop people from smoking, not to get them to smoke.
Government fines speeders so they won't speed, not to encourage them to drive
faster. And yet contrary to common sense, it seems perfectly natural to some
people that government would tax people who work or companies that are
successful only to give that money to people who don't work and to bail out
losing companies. The thought never crosses their minds that these policies are
the very reason why our economy is in such bad shape.

I'm
beginning to think that Irving Kristol was correct when he wrote, "It takes a
Ph.D. in economics not to be able to understand the obvious." It shouldn't
surprise anyone why the economy isn't getting better.

If the
U.S. wants prosperity, government doesn't need to do something, it needs to undo
much of what it already has done. Here is one area where, in the spirit of the
late Congressman Jack Kemp, President Obama and I could
agree.

African-Americans
are suffering inordinately in the Obama aftermath of the Bush Great Recession.
While overall U.S. unemployment stands at 9.1%, black unemployment has jumped to
16.7%. Black teenage unemployment is bordering on 50%, and that figure doesn't
even take into account "discouraged" workers, "involuntary" part-time workers
and "underemployed" workers. But even these numbers don't tell the real story.
They represent real people who are suffering deeply and have been suffering for
a long, long time.

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Behind
these numbers are millions of lives discouraged and despondent. People who've
lost their self-esteem and pride. The young who have given up on America and
some of whom have even turned to crime. Scars are being made across a whole
ethnic subset of America. Unemployment, underemployment and involuntary
part-time employment represent the loss of a precious natural resource that can
never be recouped. No one can feel good about himself if he's living on handouts
from Uncle Sam. We as a nation can't wait until 2013 to address this
issue.

Whether
President Obama's base finds supply-side economics appealing or not, he should
immediately join with all members of Congress from both parties to develop a
full program for enterprise zones. And while enterprise zones are
desperately needed in our inner cities, there are lots of areas in the hollows
of Kentucky and West Virginia that need enterprise zones as well, not to mention
barrios in California and New Mexico.

Enterprise
zones should be areas that are geographically defined with exceptionally high
concentrations of poverty, underachievement and unemployment. The policies
applicable to enterprise zones should include:

A)
For all
employment within the enterprise zone of people whose principal residence is
also the enterprise zone, there should be no payroll tax whatsoever, neither
employer nor employee portions. The employer need not be headquartered in the
enterprise zone to take advantage of the elimination of the employer's portion
of the payroll tax. The locus of employment does have to be in the enterprise
zone.

Don't
for a moment think that this will be a budget buster. Right now there aren't
many jobs in our inner cities anyway and the few dollars of tax revenues lost
will be more than offset by reductions in welfare spending because people will
have jobs and won't need welfare. The best form of welfare is still a good
job.

B)
Federal and state minimum wages must be suspended in the enterprise zone. If not
for all employees, then at least for employees under 30. These young people need
on-the-job training, and at the present minimum wage many of them aren't worth
hiring. That is why they are unemployed.

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A job
seeker fills out an application with Coca-Cola at a jobs fair hosted by the
Congressional Black Caucus in Miami.

Even
for teenagers who are in school, a summer job is an enormous benefit for a
future productive career. This summer and last summer only 30%
of all teens worked—all-time lows. We need to break this
vicious cycle right now by getting rid of the youth minimum wage in our
enterprise zones.

C)
In the
enterprise zones the government should do an expedited review of all building
codes, regulations, restrictions and requirements to make sure that they don't
unjustifiably impede economic growth. For example, mandated union
membership rules should be voided in enterprise zones as should all prevailing
wage provisions and the like.

When I
lived in Chicago I reviewed a number of rules and regulations and restrictions
whose primary impact was to impede our inner cities from ever achieving
prosperity. I'll bet they're even worse now.

D)
Profits generated by companies operating and employing people within the
enterprise zone should only be taxed at one-third the regular tax rate. No
matter how many fewer regulations a company faces, those companies still quite
rightly respond to profits for their shareholders.

Businesses
don't move their plant facilities as a matter of social conscience. They do it
to make profits for their shareholders. If you want more jobs in our most
depressed areas, make those areas more profitable for companies to relocate
there. It's as simple as that.

I
guarantee Mr. Obama that he will receive the support necessary to carry the day
in Congress. And once he sees how this plan works for our most depressed areas
of America, he can then extend enterprise zones to cover the whole
country.

Mr.
Laffer, chairman of Laffer Associates, is co-author, with Stephen Moore, of
"Return to Prosperity: How America Can Regain Its Economic Superpower Status"
(Threshold, 2010).

September
10, 2011

When
Health Insurance is Free

By
John C. Goodman

9/10/2011

Did
you know that an estimated one
of every three uninsured people in this country is eligible for a
government program (mainly Medicaid or a state children’s health insurance
plan), but has not signed up?

Either
they haven’t bothered to sign up or they did bother and found the task too
daunting. It’s probably some combination of the two, and if that doesn’t knock
your socks off, you must not have been paying attention to the health policy
debate over the past year or so.

Put
aside everything you’ve heard about Obama Care and focus on this bottom line
point: going all the way back to the Democratic presidential primary, Obama Care
was always first and foremost about insuring the uninsured. Yet at the end of
the day, the new health
law is only going to insure about 32 million more people out of more than 50
million uninsured.Half that goal will be achieved by
new enrollment in Medicaid. But if you believe the Census Bureau
surveys, we could enroll just as many people in Medicaid by merely signing up
those who are already eligible!

What
brought this to mind was a series of editorials by Paul
Krugman and Health
Affairs
blog and at my
blog) asserting that government is so
much more efficient than private insurers. Can you imagine Aetna or UnitedHealth
Care leaving one-third of its customers without a sale, just because they
couldn’t fill out the paperwork properly? Well that’s what Medicaid does, day in
and day out.

Put
differently, half of
everything Obama Care is trying to do is necessary only because the Medicaid
bureaucracy does such a poor job — not of selling insurance, but of giving it
away for free!

Writing
in Health
Affairs the other day, health policy guru Alain Enthoven and health care
executive Leonard Schaeffer revealed some of the gory details of what people
encounter when they do try to sign up for free health insurance from Medi-Cal
(California Medicaid) in the San Diego office:

Of
the 50 calls made over a three-month period, only 15 calls were answered and
addressed. The remaining 35 calls were met by a recording that stated, “Due to
an unexpected volume of callers, all of our representatives are currently
helping other people. Please try your call again later,” followed by a busy
signal and the inability to leave a voice message. For the 15 answered calls,
the average hold time was 22 minutes with the longest hold time being 32
minutes.

This
study, by the way, was conducted by the Foundation for Health Coverage Education
(FHCE), a nonprofit organization dedicated to helping the uninsured enroll in
available health coverage programs. The head of FHCE’s national call center
reports that his staff has taken hundreds of calls from people who have tried in
the past to enroll in Medicaid, but who found the process so complicated and
difficult that they simply quit trying.

I know
what you are thinking. What about doctors and hospitals? Can’t they help poor
people sign up for public programs and isn’t it in their self-interest to do so?
Turns out that medical providers have just as much difficulty with the Medicaid
bureaucracy as the patients do:

[I]t
routinely takes more
than 90 days for the state to enroll uninsured patients into public
programs. This is because it is the patient‘s responsibility to
apply directly to the state program to receive the needed documentation for
hospital reimbursement. Once treatment is provided and the medical incident is
over, it is difficult to ensure that the patient continues with the enrollment
process.

Can
you imagine Aetna taking 90 days to sell someone an insurance policy? What about
WellPoint? Or Blue Cross?

Another
problem is the Medicaid payment rates. They are so low that California hospitals
frequently don’t even bother to try to enroll patients who come to the emergency
room, unless they're admitted to the hospital:

[P]ublic
program reimbursement is often so low that hospitals are more likely to only
seek reimbursement for patients who are eligible for public coverage that fall
into the “treat and admit” category rather than those patients who enter the
Emergency Room with minor emergencies or illnesses. Furthermore, hospitals
estimate that they receive as low as nine percent of fully-billed charges for
Medi-Cal patients. Therefore, the providers have little financial incentive to
encourage patient enrollment in public programs.

Most
people view ObamaCare as a radical reform. Here’s an idea that is even more
radical: why not abolish Medicaid? Texas A&M professor Thomas R. Saving, a
former Trustee of Medicare, has proposed the idea of Health Care
Stamps.They would work like
Food Stamps. People who have them would be able to shop around andbuy care in
the same medical marketplace that caters to the needs of all other patients —
rich and poor alike.

I’ll
write more about this idea in the future.

wsj
SEPTEMBER 10, 2011

A
Tariff-Reduction Plan for U.S. Jobs

In his
address to Congress Thursday night, President Obama offered a tepid endorsement
of the idea that reducing trade barriers could help put Americans back to work.
But if the president is serious about creating jobs, he must take more decisive
actions to spur trade and investment and reject protectionism. That means
convincing trade-hostile Democrats of the merits of the long-pending bilateral
trade agreements with South Korea, Colombia and Panama, which he plans to submit
to Congress this month or next. He will also need to steer Congress away from
inciting an unwelcome trade war with China.

As
important as access to foreign markets is, however, some of the most significant
obstacles to U.S. export success aren't foreign-made but homegrown. If the
president is genuinely committed to spurring economic growth and job creation,
he will take the lead on reducing or eliminating duties that U.S. producers pay
on imported raw materials and components they need for manufacturing. This would
instantly boost the competitiveness of U.S. products at home and abroad.

The
same demographics that have created growing foreign markets also mean there are
more foreign suppliers of raw materials, industrial inputs, and other
intermediate goods used by U.S. producers in their own production processes.
Last year, U.S. Customs
and Border Patrol collected $30 billion in duties on $2 trillion of imports, 55%
of which were ingredients for U.S. production—such as chemicals, minerals and
machine parts. Purchases of imported inputs accounted for more than $1 trillion
of U.S. production costs, a price tag that was roughly $15 billion higher than
it might have been without U.S. import duties.

What
is the point of negotiating a 5% reduction in a foreign tariff on behalf of
certain U.S. exporters while ignoring the fact that, to produce those exports as
domestic manufacturers, they are required to pay a 50% import tax
on the most crucial raw materials? Reducing import barriers has
the same effect on profit as does improving market access abroad, but with the
added benefit of increasing U.S. competitiveness. And it can be achieved without
waiting for consent from abroad.

President
Obama understands this. Last year, when signing into law the Manufacturing
Enhancement Act of 2010 (a bill to temporarily reduce or eliminate duties on
certain imported raw materials) the president acknowledged that the new law
"will significantly lower costs for American companies across the manufacturing
landscape—from cars to chemicals; medical devices to sporting goods" and will
"boost output, support good jobs here at home, and lower prices for American
consumers."

Now
the president should push Congress to reduce or eliminate, on a permanent basis,
all tariffs on industrial inputs so that U.S. producers are more competitive in
the global economy and so that America is a more appealing destination for
foreign direct investment. That approach has produced good results in Canada,
where the government has been reducing tariffs on manufacturing inputs for the
past few years.

Meanwhile,
some import duties can be eliminated with a stroke of the president's pen. First
should be antidumping duties, imposed on inputs needed by U.S. producers. The
antidumping law is purported to penalize foreign producers accused of injuring
U.S. firms by selling in the United States at lower prices than they charge at
home. Some U.S. industries lobby vigorously for such duties simply because they
hobble the foreign competition.

Yet
more than 80% of the nearly 300 U.S. antidumping measures in force today
restrict imports of raw materials and intermediate goods, thus penalizing U.S.
producers. Antidumping duties on magnesium or
polyvinyl chloride or hot-rolled steel may allow domestic producers of those
inputs to raise prices and reap greater profits. But they hurt many more
downstream U.S. producers of auto parts, paint and appliances, who consume those
inputs in their own manufacturing processes and who are more likely to export
and create new jobs than are the firms that seek trade restrictions.

Earlier
this year, U.S. Trade Representative Ron Kirk unintentionally made the case for
antidumping reform while describing the consequences of Chinese restrictions on
exports of nine raw materials. He noted that "these measures skew the playing
field against the United States and other countries by creating substantial
competitive benefits for downstream Chinese producers that use the inputs in the
production and export of numerous processed steel, aluminum and chemical
products and a wide range of further processed products."

What
Amb. Kirk failed to mention is that the U.S. government itself maintains
antidumping restrictions on three of those nine raw materials, which raises
production costs in the same manner he described but also chases U.S. producers
offshore, where these inputs are available at world market prices. (My recent
study, "Economic Self-Flagellation: How U.S. Antidumping Policy Subverts the
National Export Initiative," explains how antidumping restrictions on magnesium
and silicon metal are encouraging high-value-added industries to move
offshore.)

Improving
access to foreign markets, through trade agreements and other measures, will be
essential to continued U.S. economic growth. But for maximum effect, the
president should strongly advocate the elimination of duties on imported
manufacturing inputs and other domestic impediments to U.S. competitiveness
abroad and at home.

Mr.
Ikenson is associate director of the Herbert A. Stiefel Center for Trade Policy
Studies at the Cato Institute.

September 8,
2011

Can For-Profit Colleges Save Higher
Education?

For-profit
colleges are on the ropes. Damaging congressional investigations, a
bruising fight over new federal regulations and a stagnant economy have all
combined to reverse what had been unprecedented growth in for-profit
enrollments. As Bloomberg BusinessWeek reported last week, financial
analysts now see an outlook for proprietary colleges that ranges from uncertain
to gloomy, says

Andrew
Kelly, a research fellow at the American Enterprise
Institute.

Consumers
and investors have reason to be wary.

·Federal
statistics indicate that 25 percent of all for-profit students who started
repaying their loans in 2008 had defaulted three years later.

·In
public colleges, the comparable figure was just 10 percent.

·Although
for-profits enroll only about 10-15 percent of all students, their students make
up about 47 percent of all three-year loan defaults.

·By
2015, new federal regulations will cut off student aid dollars to for-profit
programs whose graduates struggle to pay back their loans.

So what do
the for-profits have to offer? Kelly sees three things:

·First,
the for-profits have shown an ability to grow and expand their capacity.

·Third,
the for-profits have shown a knack for getting students over the finish line in
their two-year programs.

This is not
an argument for or against for-profit colleges as currently conceived.
Providing expertise, infrastructure and services to willing, entrepreneurial
partners in the non-profit and public sectors would enable for-profits to
accomplish two goals.

·First,
the model would shift much of the risk inherent in educating nontraditional
students to their partner organizations and provide for a more politically
stable revenue stream.

·Second,
this new arrangement would clearly harness their wealth of knowledge and
innovative spirit to the nation's new higher education goals.

Jobs,
Wages, and WalmartShoppers
in Washington, DC, may find comfort in Walmart's announcement that the retail
giant will open four stores in the District starting next year. But despite its
popularity with consumers, Walmart has no shortage of critics who complain that
it reduces employment, pays low wages, and destroys communities. Independent
Institute Research Fellow Art
Carden takes on each of those claims in an op-ed for the
Washington Examiner. READ MORE

Student
loan default rates jump

The
number of borrowers defaulting on federal student loans has jumped sharply, the
latest indication that rising college tuition costs, low graduation rates and
poor job prospects are getting more and more students over their heads in
debt.

The
national two-year cohort default rate rose to 8.8 percent last year, from 7
percent in fiscal 2008, according to figures released Monday by the Department
of Education.

Driving
the overall increase was an especially sharp increase among students who borrow
from the government to attend for-profit colleges.

Of the
approximately 1 million student borrowers at for-profit schools whose first
payments came due in the year starting Oct. 1, 2008 _ at the peak of the
financial crisis _ 15 percent were already at least 270 days behind in their
payments two years later. That was an increase from 11.6 percent among those
whose first payments came due the previous year.

At
public institutions, the default rate increased from 6 percent to 7.2 percent
and from 4 percent to 4.6 percent among students at private not-for-profit
colleges.

"I
think the jump over the last year has been pretty astonishing," said Debbi
Cochrane, program director for the California-based Institute for College Access
& Success.

Overall, 3.6 million borrowers entered
repayment in fiscal 2009; more than 320,000 had already defaulted last fall, an
increase of 80,000 over the previous year.

The
federal default rate remains substantially below its peak of more than 20
percent in the early 1990s,
before a series of reforms in government lending. But after years of steady
declines it has now risen four straight years to its highest rate since 1997,
and is nearly double its trough of 4.6 percent in 2005.

Troubling
as the new figures are, they understate how many students
will eventually default. Last year's two-year default rate
increased to more than 12 percent when the government made preliminary
calculations of how many defaulted within three years. Beginning next year, the
department will begin using the figure for how many default within three years
to determine which institutions will lose eligibility to enroll students
receiving government financial aid.

The
figures come as a stalled economy is hitting student borrowers from two sides _
forcing cash-strapped state institutions to raise tuition, and making it harder
for graduates to find jobs. The unemployment rate of 4.3
percent for college graduates remains substantially lower than for those without
a degree. But many student borrowers don't finish the degree
they borrow to pay for.

The
Department of Education has begun an income-based repayment plan that caps
federal loan payments at 15 percent of discretionary income. And new regulations
the Obama administration has imposed on the for-profit sector have prompted
those so-called proprietary colleges to close failing programs and tighten
enrollment. Both developments could help lower default rates in the
future.

Administration
officials took pains to praise the for-profit sector for recent reforms, but
also said flatly that those schools _ along with the weak economy _ are largely
to blame for the current increases. Among some of the largest and
better-known operators, the default rate at the University of Phoenix chain rose
from 12.8 to 18.8 percent and at ITT Technical Institute it jumped from 10.9
percent to 22.6 percent.

"We
are disappointed to see increases in the cohort default rates for our students,
as well as students in other sectors of higher education," said Brian Moran,
interim president and CEO of APSCU, the Association of Private Sector Colleges
and Universities, which represents the for-profit sector. He said for-profit
schools were taking remedial steps, including debt counseling for students, to
bring down the rates.

"We
believe that the default rates will go down when the economy improves and the
unemployment rate drops," he said.

ITT,
owned by ITT Educational Services, did not immediately respond to requests for
comment.

Chad
Christian, a spokesman for Phoenix, owned by Apollo Group, Inc., said colleges
throughout the country are seeing increased default rates due to the
economy.

The
department emphasized that it eventually manages to collect most of the money
it's owed, even from defaulters. But that's part of the reason federal student
loan defaults are so hard on borrowers _ they can't be discharged in bankruptcy.
Defaulting can also wreck students' credit and keep them from being able to
return to school later with federal aid.

"There
are very few avenues for escaping that," Cochrane said. Also, "many employers
these days are starting to check credit so it can hurt your job
prospects."

According
to calculations by TICAS and using the latest available figures, in 2008 average debt for graduating
seniors with student loans was $20,200 at public universities, $27,650 at
private non-profits and $33,050 at private
for-profits.

___

Justin
Pope covers higher education for the AP. You can reach him at
twitter.com/jnn_pope97

Too
Much Higher Education

By
Walter E. Williams

9/14/2011

Too
much of anything is just as much a misallocation of resources as it is too
little, and that applies to higher education just as it applies to everything
else. A recent study
from The Center for College Affordability and Productivity titled "From Wall
Street to Wal-Mart," by Richard Vedder, Christopher Denhart, Matthew Denhart,
Christopher Matgouranis and Jonathan Robe, explains that college education for
many is a waste of time and money. More than one-third of currently working
college graduates are in jobs that do not require a degree. An essay by Vedder
that complements the CCAP study reports that there are "one-third of a million
waiters and waitresses with college degrees." The study says
Vedder -- distinguished professor of economics at Ohio University, an adjunct
scholar at the American Enterprise Institute and director of CCAP -- "was
startled a year ago when the person he hired to cut down a tree had a master's
degree in history, the fellow who fixed his furnace was a mathematics graduate,
and, more recently, a TSA airport inspector (whose job it was to ensure that we
took our shoes off while going through security) was a recent college graduate."

The
nation's college problem is far deeper than the fact that people simply are
overqualified for particular jobs. Citing the research of AEI scholar Charles
Murray's book "Real Education" (2008), Vedder says: "The number going to college
exceeds the number capable of mastering higher levels of intellectual inquiry.
This leads colleges to alter their mission, watering down the intellectual
content of what they do." In
other words, colleges dumb down courses so that the students they admit can pass
them. Murray argues that only a modest proportion of our population has the
cognitive skills, work discipline, drive, maturity and integrity to master truly
higher education. He says that educated people should be able to read and
understand classic works, such as John Locke's "Essay Concerning Human
Understanding" or William Shakespeare's "King Lear." These works are "insightful
in many ways," he says, but a person of average intelligence "typically lacks
both the motivation and ability to do so." Mastering complex forms of
mathematics is challenging but necessary to develop rigorous thinking and is
critical in some areas of science and engineering.

Richard
Arum and Josipa Roksa, authors of "Academically Adrift: Limited Learning on
College Campuses" (2011), report on their analysis of more than 2,300
undergraduates at 24 institutions. Forty-five percent of these students
demonstrated no significant improvement in a range of skills -- including
critical thinking, complex reasoning and writing -- during their first two years
of college.According to an August
2006 issue brief by the Alliance for Excellent Education, student "lack of
preparation is also apparent in multiple subject areas; of college freshmen
taking remedial courses, 35 percent were enrolled in math, 23 percent in
writing, and 20 percent in reading." Declining college admissions standards have
contributed to the deterioration of the academic quality of our secondary
schools. Colleges show high schools that they do not have to
teach much in order for youngsters to be admitted.

According
to Education Next, an August Harvard University study titled "Globally
Challenged: Are U.S. Students Ready to Compete?" found that only 32 percent of
U.S. students achieved proficiency in math, compared with "75 percent of
students in Shanghai, 58 percent in Korea, and 56 percent in Finland. Countries
in which a majority -- or near majority -- of students performed at or above the
proficiency level in math include Switzerland, Japan, Canada, and the
Netherlands." Results from the 2009 Programme for International Student
Assessment international test show that U.S. students rank 32nd among
industrialized nations in proficiency in math and 17th in reading.

Much
of American education is in shambles. Part of a solution is for colleges to
refuse to admit students who are unprepared to do real college work. That would
help to reveal the shoddy education provided at the primary and secondary school
levels. Here I'm whistlin' "Dixie," because college administrators are more
interested in numbers of students, which equal more money.

Walter
E. Williams

Dr.
Williams serves on the faculty of George Mason University as John M. Olin
Distinguished Professor of Economics

Metropolitan
areas with big durable-goods manufacturing sectors grew much faster than the
all-metropolitan average of 2.5% in 2010,
according to new
data on local gross domestic product released by the Commerce Department
this morning. Durham-Chapel Hill, North Carolina, for example, grew 6.6%, led by
a big surge in its manufacturing sector. Same for the Titusvilla, Florida, area,
along Florida’s “Space Coast,” which grew 4.7% in 2010.

One
area of particular interest was Indiana, where manufacturing helped
several cities reverse big drops in output from 2009. Elkhart, Indiana, for
example, was the nation’s third-fastest-growing metro area in 2010, a year after
it experienced the country’s biggest contraction. (Its GDP
remains 4.3% below its 2008 level, however.)

The
U.S. manufacturing sector has been a rare bright spot in the economic recovery,
buoyed in part by strong demand from overseas. But slowing global growth could
threaten that resurgence — and the areas that have benefited from
it.

wsj
September 13, 2011, 12:31 PM ET

Income,
Poverty and Health Insurance Report: Fast Facts

by
David Wessel

The
Census
Bureaureleased
its annual report on Income, Poverty and Health Insurance Coverage in the
United States today. Here are some quick bullet points:

–Median
household income in 2010 was $49,445, down 2.3% from 2009 and down 6.4% from
prerecession level.

–Median
household income in 2010 was $49,445. That’s 7.1% lower (adjusted for inflation)
than it was in 1999

–Median
earnings for full time male worker in 2010 was $47,715. Adjusted for inflation,
it was $48,245 in 1978.

–Median
earnings for men who worked full-time year round was $47,715 in 2010, down 0.4%.
For women it was $36,931, up 1.5%.

–Best
off 5% of households (adjusted for household size) got 21% of income in
2010.

–
Official poverty rate in 2010 was 15.1%, up from 14.3% in 2009, third
consecutive annual increase

Income Slides to 1996 Levels

Median
Household Earnings Fall for Third Year, Census Says

The
income of the typical American family—long the envy of much of the world—has
dropped for the third year in a row and is now roughly where it was in 1996 when
adjusted for inflation.

The
income of a household considered to be at the statistical middle fell 2.3% to an
inflation-adjusted $49,445 in 2010, which is 7.1% below its 1999 peak, the
Census Bureau said.

The
poverty rate clicked up again this year. WSJ's David Wessel, DJ Newswires' Neal
Lipschutz and MarketWatch's David Callaway discuss on The News Hub whether the
government needs to intervene to the rising number of Americans
affected.

The
Census Bureau's annual snapshot of living standards offered a new set of
statistics to show how devastating the recession was and how disappointing the
recovery has been. For
a huge swath of American families, the gains of the boom of the 2000s have been
wiped out.

Earnings
of the typical man who works full-time year round fell, and are lower—adjusted
for inflation—than in 1978.Earnings for women,
meanwhile, are a relative bright spot: Median incomes have been rising in recent
years and rose again last year, though women still make 77 cents for every
dollar earned by comparably employed men.

The
fraction of Americans living in poverty clicked up to 15.1% of the population,
and 22% of children are now living below the poverty line, the biggest
percentage since 1993.

Enlarge
Image

Close

To be
sure, there are other measures of American financial health that are more
positive. The nation's
per capita net worth, for instance, hit $169,691 at the end of 2010, according
to the Federal Reserve, up from $147,889 in 2007.Much of that gain is in the form of
stocks, retirement accounts and other investments.The biggest asset of most American
families is their homes, and those have declined in value in recent
years.

And
there are those who
argue the Census report offers a flawed gauge of living standards. For example,
the Census Bureau adjusts for inflation using government measures that attempt
to reflect the improving quality as well as price of goods. But these inflation
adjustments are imperfect and don't reflect advances in medicine, the wonders of
the Internet or the improvements in air
quality.

U.S.
household incomes fell for the third straight year in 2010, driving up the
poverty level to the highest level in nearly 20 years. WSJ's Conor Dougherty has
details. Photo: Spencer Platt/Getty Images

Deborah
Bagoy-Skinner and her husband, Chester, are among the faces behind the numbers.
Four years ago, the Tucson, Ariz., couple owned their home and had a combined
income of around $100,000, much of which came from Mr. Skinner's job conducting
safety training classes for a heavy-equipment maker.

They
lost their three-bedroom home in 2007 during a two-year spell of unemployment,
and have since downgraded to a two-bedroom rental. Through 2008 and 2009, the
darkest days of the recession, they sold everything from golf clubs to antique
nickels to pay rent and bills. Today the couple is well above the poverty line:
Mr. Skinner makes about $65,000 a year doing contract safety classes. But with
their savings wiped out it will be a long road back, and likely they won't own
another home or ever make as much as they once did. "We've pretty much accepted
that that probably won't happen," she says.

The
Census report, viewed as a key gauge of American prosperity, comes at a time of
growing anxiety about the health of the U.S. economy and is likely to play into
the political dialog this election year. With more than 14 million
unemployed, many of them out of jobs for extended periods, the
recovery is faltering and the administration and Congress are debating how to
respond. Consumers
account for some 70% of demand, so thinner pay checks are a
major problem for anyone trying to boost growth and get the unemployed back into
jobs.

The
Census report was studded with data that underscore the economic strains across
society in the aftermath of the worst recession in more than half a century.
Poverty rates among
people younger than 18 grew to 22%, compared with 20.7% the year before, while
the percentage of Americans lacking health insurance edged up to
16.3%. Echoing a longer-term trend that is in part a reflection
of an aging population, the share of people covered by private insurance fell
last year, while the share of people on government programs such as Medicare and
Medicaid increased.

More

As
families struggle to make ends meet and young workers navigate the moribund
labor market, many have turned to each other. According to the Census report, 5.9
million Americans between 25 and 34, or 14.2% of that group, lived with their
parents in spring 2011, compared with 4.7 million before the recession, or
11.8%.

Meanwhile,
the gap between the
best-off and worst-off Americans remained largely unchanged. The top fifth of
households accounted for 50.2% of all pre-tax income; the bottom two-fifths got
11.8%. In 1999, the top fifth claimed 49.4% and the bottom got 12.5% of the
income.

The
Census Bureau said 15.1% of Americans were living below the poverty line, set at
$22,314 for a family of four in 2010. That's up from 14.3% last year and
from 12.5% in 2007, before the recession. The official poverty rate
overestimates the number of people living in poverty because it doesn't count
many government anti-poverty programs, such as subsidized housing, food stamps
and the Earned Income Tax Credit.

Corrections
& AmplificationsThe Census Bureau's
latest report said 15.1% of Americans lived below the poverty line in
2010. An earlier version of this article incorrectly said 15.1% of U.S.
families were below the line.

SEPTEMBER
14, 2011

Leave the Euro to the PIGS

Europe's
responsible countries should establish their own new currency
union.

The
European debt crisis spreads and worsens. The G-7 met last weekend and did
nothing useful. The European Central Bank's chief economist, who was the German
representative on the ECB, resigned last week to protest the bank's purchases of
Italian and Spanish debt. My congratulations to him for reaffirming principles
that the ECB was organized to support. The president of Germany's Bundesbank,
the very able Axel Weber, resigned last spring because he did not support the
policy of buying long-term debt of overindebted countries. He too chose
principle over expediency. The long-term debt purchases continue.

The
Europeans keep throwing money at problems and insisting on short-term
palliatives. They
are too willing to spare the bankers for past mistakes by trying to shift the
cost of bad debt to unwilling taxpayers. Many propose a "European bond" to hide
the fact that they want to shift the excessive debt contracted by the spenders
to the more fiscally prudent. The current ECB acts on the belief
that all problems can be solved by
bailouts.

The
ECB agreement to develop a common currency began as an agreement that France
would accept Bundesbank rules in exchange for a seat at the table. Other countries agreed to the rules
for maintaining price stability when they joined. But the agreement has been
violated so often in the current crisis that it is dead, replaced by bailouts
and fiscal actions, including purchases of long-term debt by the
ECB.

Enlarge
Image

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Bloomberg

Francois
Baroin, France's finance minister, left, Jean-Claude Trichet, president of the
ECB, center, and U.S. Treasury Secretary Timothy Geithner at the G7 meeting in
Marseille, France, on Friday.

Lending
more money to Greece will not end Greece's problem. Greece cannot meet the
budget targets set by its agreements with the European Union and the
International Monetary Fund (IMF).
A core problem is
the wide gap between average worker's productivity and the average real wage.
The difference is about 15% to 20%; that's the amount by which productivity must
increase or real wages must fall to achieve
equilibrium.

Since
there is no chance that in Greece's state-controlled economy productivity can
increase enough to close the gap, there are two outcomes left. One is to remain
with the euro and deflate prices and wages 2% or 3% a year for six to 10 years.
The other is to devalue the currency (as Greece has done several times in the
past). Good luck to those who think any government could endure six or more
years of deflation.

One
thing is certain: Higher real-estate taxes or income taxes, among other
proposals being floated in Athens, will not solve the Greek problem. Nor will a
few sales of state-owned assets followed by large layoffs.

Another
proposed alternative is another loan from the International Monetary Fund. Yet
that delays resolution without solving any problem, and it shifts part of the
cost to the countries that pay large shares into the IMF, such as the U.S.,
Britain and Japan, which have their own severe problems.

And
then there is Italy, which has had
low growth for a decade or more. Asian competition was too much for
many small manufacturers of shoes, textiles and other products that Italy used
to export. Italy continues to waste its potential by spending on
low-productivity, politically-determined transfer programs. A currency
devaluation would help to align Italy's costs with current world conditions.
Government spending reductions would free resources for higher productivity
uses.

Although
the European Central Bank treaty does not permit devaluation,there is a way for Greece, Italy,
Portugal and perhaps others (known by the acronym PIGS) to devalue while
remaining part of the euro. The northern countries can start a
new currency union limited to those who adopt common, binding or enforceable
fiscal arrangements like those that German Chancellor Angela Merkel and France's
President Nicolas Sarkozy discussed last month.The new currency could float against
the euro, allowing the euro to devalue. Once devaluation
restored competitive prices in the heavily indebted countries, they could be
admitted to the new currency arrangement if, and only if, they made an
enforceable commitment to the tighter fiscal arrangement. If all countries
rejoined, the old system would restart with a more appropriate, binding fiscal
policy rule.

Bondholders
would suffer losses from devaluation. Banks that are threatened with insolvency
should be permitted either to fail or to borrow from their governments on loans
that must be repaid.

We
have had enough clever schemes to protect bankers by shifting the cost of
profligacy to the prudent citizenry. A
permanent solution to the European debt problem requires a lot less finger
pointing and much greater efforts to bring an end to the excessive debt and
deficit spending. Spare the taxpayers, not the bankers. Let the market work to
end the problem by devaluing the troubled currencies.

Mr.
Meltzer is a professor of public policy at the Tepper School, Carnegie Mellon
University, a visiting scholar at the Hoover Institution and author of "A
History of the Federal Reserve" (University of Chicago Press, 2003 and
2009.)

Wsj SEPTEMBER 15, 2011, 8:04 A.M.
ET

Netflix Lowers Subscriber Estimates

Netflix
Inc. lowered its third-quarter domestic subscriber estimates but backed its
decision to separate DVD-rental and movie-streaming services, saying the
decision was "the right long-term strategic choice."

Shares dropped 10.6% to $186.50 premarket as
the video renter said the decision to split its services has upset many
subscribers, but it believes the split will improve global streaming services
and help grow revenue. The stock has risen 46% over the past year through
Wednesday's $208.71 close.

The company ended its popular $9.99 per-month
DVD-rental and movie-streaming plan, and required customers to pay $7.99 a month
for each service, starting in September.

The company expects to end the quarter with
21.8 million domestic streaming subscribers and 14.2 million U.S. DVD
subscribers, down from its prior forecast of 22 million and 15 million,
respectively. Its financial and international-subscriber guidance are unchanged.

The company had said it expected total
subscribers to continue growing and that its fiscal quarter following the
pricing changes could lead to the first time it notches at least $1 billion in
sales.

The company ended the second quarter with 25.6
million subscribers.

Netflix in July reported its second-quarter
earnings rose 57%, but its domestic churn rate—a measure of customer
cancellations and free subscribers—rose to 4.2% from 4% a year earlier.

Nearly $19 billion in state unemployment
benefits were paid in error during the three years that ended in June, new
Labor Department data show.

Source: Labor
Department

The amount represents more than 10% of the $180
billion in jobless benefits paid nationwide during the period. (See
a sortable chart of each states overpayments) The tally covers state
programs, which offer benefits for up to 26 weeks, from July 2008 to June 2011.
Layers of federal programs that help provide benefits for up to 99 weeks weren’t
included.

The figures were released Wednesday as the
Obama administration promotes its bid to reduce waste at federal agencies. The
federal government foots the bill for administering the programs, and states are
supposed to pay for the benefits. Many states exhausted their unemployment
insurance trust funds during the long recession and slow recovery, prompting
them to borrow from the federal government to replenish their
funds.

Improper payments most often occur when
recipients claim benefits even though they have returned to work; employers or
their administrators don’t submit timely or accurate information about worker
separations; or recipients don’t correctly register with a state’s
employment-service organization.

The Labor Department launched a plan to crack
down on the improper payments, targeting Virginia, Indiana, Colorado,
Washington, Louisiana and Arizona in particular for their high error rates.
Those states will undergo additional monitoring and technical assistance until
their error rates dip below 10% and remain there for at least six months,
according to the Labor Department.

“The Unemployment Insurance system is a unique
partnership between the federal government and the states. States bear the
responsibility of operating an efficient and effective benefits program, but as
partners the federal government must be able to hold them accountable for doing
so,” Labor Secretary Hilda Solis said in a
release.

Indiana had the highest error rate, with
improper payments accounting for more than 43% of the total amount paid. But
Mark Everson, commissioner of the Indiana Department of
Workforce Development, said the differences in error rates stem from
variations in state programs.

“To characterize it as waste, fraud and abuse
is just manipulative,” Mr. Everson said. “There’s no way in the world you could
cut the 43% of people off.”

Mr. Everson pointed out that in Indiana,
benefit recipients are required to list three work searches. If a recipient
fills out only two of the three searches correctly, there are cases when the
recipient can still receive benefits. But that counts as an
error.

The Labor Department noted, “it may be
misleading to compare one state’s payment accuracy rates with another state’s
rates… States with stringent or complex provisions tend to have higher improper
payment rates than those with simpler, more straightforward
provisions.”

The number of small businesses seeing a skills
shortage has crept up this year. In August, 33% of small businesses reported
having few or no qualified applicants for job openings, according to a
National Federation of Independent Business survey. That was up
from 21% in December 2009, but down from 46% five years
earlier.

Consumers paid more for range of items in
August

Consumers paid more for gas, food, rent and
other items in August, raising inflation pressures

For the 12 months that ended in August, the
core index surged 2 percent, the biggest year-over-year increase in nearly three
years. That's at the high end of the Federal Reserve's informal inflation
target. It could limit the central bank's ability to take further steps to try
to revive the economy.

The Labor Department said food prices rose 0.5
percent, the biggest increase since March. That was due to higher prices for
cereals and dairy products. Energy prices increased 1.2
percent.

Among the factors driving up the core index
were rental costs. They rose 0.4 percent, the most in nearly three years. Many
Americans have been renting rather than buying homes, pushing up
rents.

Sharp price increases for gas and food have
pushed up most measures of inflation this year. That has reduced consumers'
purchasing power, cut into their ability to spend on other items and weakened
the economy. But the prices of many commodities have retreated since the summer.
And many economists forecast that inflation will peak in the next few
months.

Since August, gas prices have ticked up. The
average nationwide price of gas was $3.63 a gallon Wednesday, according to AAA.
That was about 4 cents higher than a month ago.

Some inflation can be healthy for the economy.
That's because it encourages people to spend and invest rather than sitting on
their cash. More spending drives corporate growth, which makes businesses more
likely to hire.

There are signs that core consumer prices could
level off soon. Cotton prices have come down by nearly half from the spring, and
clothing costs are expected to follow.

And new-car prices rose earlier this year
because of supply shortages caused by Japan's March 11 earthquake. The impact of
that disruption is beginning to fade. New-car prices were unchanged in August
for the second straight month.

Food prices are still rising. The Agriculture
Department said Monday that unusually hot summer weather has damaged the corn
harvest, which could raise prices for corn and ultimately most food products.
That's because corn is used in everything from cereals to animal feed to sodas.
It takes about six months for changes in corn prices to filter down to grocery
store shelves.

Fed Chairman Ben Bernanke acknowledged last
week that rising commodity prices had pushed up inflation this year but said it
was likely to moderate in coming months.